Innovative retirement mortgage launched by Hodge Lifetime
Equity release specialist, Equity Release Supermarket has announced an innovative new retirement mortgage from Hodge Lifetime. The Hodge Lifetime Retirement Mortgage could provide retirees with a way to break from the shackles of their interest-only mortgage.
Responding to the growing interest-only mortgage crisis, Hodge Lifetime has launched its new retirement mortgage, available from on 1st August 2013. The innovative solution challenges the traditional equity release model, where companies offer mortgages based on a loan-to-value system. Instead Hodge has developed an interest only lifetime mortgage plan based on income.
The plan is similar in concept to the Halifax Retirement Home Plan which was widely sold up until August 2011. However, the new Hodge Lifetime Retirement Mortgage Plan aims to offer features akin to the Halifax Retirement Home Plan, but with a eye on the impending Mortgage Market Review in April 2014 and a more responsible lending attitude towards retirees.
As Mark Gregory, Director of Equity Release Supermarket explained, the Hodge Lifetime Retirement Mortgage can provide an alternative for retirees trapped in an interest only mortgage: “Subject to meeting the Hodge Liftetime criteria, a homeowner could exit their existing arrangement and remortgage to the Hodge plan, thereby consolidating a new mortgage for life.
“We believe it could be particularly beneficial for 55-65 year olds who may be limited in their options because other interest only lifetime mortgage schemes will only lend on age & property value. For example, the Stonehaven Max product would allow someone aged 55 to borrow a maximum of 19% of the property value. However, the new Hodge plan, subject to income verification, could allow someone to raise up to 50% of the property value.
“We believe this sort of product is vital for the market, meeting responsible lending guidelines whilst giving older homeowners more choice.”
What Is A Retirement Mortgage?
A retirement mortgage is aimed at retirees who want to raise capital either shortly before pensionable age or after, with a view to maintaining monthly payments into their retirement.
Retirement mortgages provide a form of inheritance protection as the mortgage balance remains level throughout the whole term. However, lenders have reigned in retirement mortgages due to the credit crunch & following FCA guidance. Therefore options have become even more limited.
How does the Hodge Lifetime Retirement Mortgage work?
In essence it’s an interest only lifetime mortgage. The plan enables people between the ages of 55 – 70 to borrow money which is secured against their property. Monthly interest payments are then made to the lender, thus maintaining a level balance.
It’s available to people with sufficient disposable income to make monthly mortgage payments until the youngest borrower reaches age 80. This cautious approach means that income needs to be proven & must be payable for life.
Once age 80 is attained, a decision can then be made whether to continue with the monthly payments, or switch to a roll-up equity release scheme and cease any monthly payments.
As a form of lifetime mortgage, this retirement mortgage will usually be repaid upon death, or moving into long term care. At that point the house is sold, the proceeds of which repay Hodge Lifetime and the remaining balance passing to the beneficiaries.
Additional Features
Flexible Repayment Option – in the first 5 years, up to 10% of the initial capital can be repaid with no penalty.
5 Year Fixed Interest Rate – initial rate of 4.75% which reverts to standard variable rate thereafter with the option to fix again, if required.
Fixed Early Repayment Charges – reduce year-on-year. Yr 1 – 5% to Yr 6 – 0%
Loan size - Minimum loan of £20,000 with a maximum of £300,000.
Good credit history required
No negative Equity Guarantee included
Initially, the Hodge Lifetime Retirement Mortgage is only being launched via a limited number of independent equity release brokers including Equity Release Supermarket who can advise on all the available options.
Homeowners requiring further information can visit equityreleasesupermarket.co.uk.