Is the Halifax Retirement Mortgage a Good Alternative to Equity Release?
For many people approaching their retirement, the concept of equity release can be a welcome edition to boost the available funds in their pension. Equity release schemes have been specially designed for the over fifty fives’ age group and can present a viable option for most retired people. However, there are a number of terms and conditions including the possibility of early repayment charges which make some consider other alternatives, such as the Halifax retirement mortgage.
What is the Halifax Retirement Mortgage?
Unfortunately, the Halifax retirement mortgage is no longer available for new customers. It was a uniquely designed product especially for the retired. This lifetime mortgage was offered as an alternative to roll up schemes and other equity release plans. It allowed for home owners to enjoy many of the benefits of equity release while ensuring the balance of the loan remained static through monthly interest only payments. The plan was subject to a minimum age requirement of sixty five, although discretion was available for those parties who were younger than sixty five but retired. A maximum term of forty years was available which meant that most people would only need to repay when the property was sold after their death. However, it also allowed for home owners to avoid early repayment charges since they could sell the property and downsize once the term had expired.
Alternatives to the Halifax Retirement Mortgage
There is a great variety of equity release schemes and plans which offer a viable alternative to the Halifax retirement mortgage. Some of these plans offer the option to make interest only payments on lifetime mortgages to maintain the balance; while others offer the option of no early repayment charges or a sliding scale to minimise the fees should you decide to repay the equity release early. Additionally, some plans have the flexibility to allow you to transport the plan to another property, should you decide to move home or downsize. In order to determine the best possible alternative to this expired plan, you would need to determine your priorities and what you are looking to achieve with equity release. You will need to consider several factors including:
• Whether there would be any potential circumstances which would allow you to repay early. You may be expecting a lump sum payment from a retirement fund or be a beneficiary in someone’s estate after which you would look to repay the equity release early. If this is in any way a possibility you should look for a scheme which allows for reduced or no early repayment charges to be applied.
• If you have sufficient income to make any interest payments. Making interest payments on a lifetime mortgage can give you a greater degree of control on your estate, since you are aware of the exact balance of the loan and how much of the value of your property would be required to cover it. However, you should consider whether you have sufficient disposable income to make this a possibility. Many schemes will consider pension payments and even state benefits but you need to be sure that it would not compromise your lifestyle and make it difficult to live comfortably in the event that the costs of living increase. Some plans offer flexibility with regards to interest payments, allowing them as a voluntary component to the lifetime mortgage. If you are interested in maintaining the balance but are unsure whether you could feasibly manage it, this could be an option for you.
• If you plan on downsizing to another property, then you will need to consider this when making your equity release plans. Some schemes allow this type of flexibility but others will restrict the loan to value ratio which could mean that a smaller property would not have sufficient equity and you would face early repayment charges. If there is a possibility that you would like to downsize at a later date, you should look for plans which offer a greater degree of flexibility.
Equity release can be an excellent financial solution for a great many retired people. However, in order to ascertain the best possible plan for your circumstances, you should consult with a professional and specialist adviser. They will be able to assist you in matching an equity release scheme to your specific needs, reducing the risk of early repayment charges and other fees which could compromise your financial situation. It is worth explaining your circumstances and requirements fully to your adviser, to ensure that you can move forward with the option which is best suited to your needs.