The resurgence of the equity release market gathers momentum in 2011 with the news that New Life Mortgages are set to re-introduce their landlord & second home equity release schemes on 11th February 2011.
Following the additions of more2life & New Life Mortgages to the equity release market late in 2010, the latest launch from the innovative lifetime mortgage lender signals a degree of diversity to their portfolio.
New Life Mortgages temporarily withdrew from equity release market in 2009. They obviously haven’t been sat idle, but instead waited for their opportunity to re-enter at the right time & with the right products.
Following on from my previous article on New Life Mortgages rejoining the equity release market in November 2010, here we discuss the features & benefits to landlords of this unique equity release plan.
How does equity release schemes work?
The New Life Mortgages Landlord Loan provides a tax free cash lump sum based on a percentage of the value of the residential investment property & the age of the applicant. Plans start at age 55 & any landlord with a portfolio of upto 5 rental properties can potentially release some of the equity tied up within them.
This buy to let equity release has no set repayment date & no monthly repayments to make. The loan is eventually repayable on the sale of the property when the last surviving borrower has died or gone into care.
How do I qualify for equity release?
- Minimum age of 55 (for joint applicants minimum age 55 of the youngest)
- Investment property must be in England & Wales
- Landlord loan minimum property valuation of £100,000 & a maximum of £1million
- Minimum release is £25,000 & maximum is £500,000
- The property should be standard construction with flats over 5 storeys excluded
- If leasehold property, then 80 years must be remaining on the lease
- Any existing mortgage must be repaid on commencement of the Landlord scheme
How Much Can I Borrow With Equity Release?
This is determined by the age of the youngest applicant & the value of the investment properties:-
Age 55 – 16%
Age 60 – 21%
Age 65 - 26%
Age 70 - 31%
Age 75 – 36%
Age 80 – 41%
Age 85+ – 45%
Therefore, as an example a 65 year old landlord with a single investment property of £200,000 could potentially release a capital lump sum of £52,000.
How does it compare to a normal equity release scheme?
The scheme in principle works exactly the same. You borrow the money, the interest accrues on a monthly basis & it is repaid when the property is finally sold.
The differences lie in the rental side; an assured shorthold tenancy agreement must be in place to qualify & cannot be let to family members.
Also, there are maximum borrowing criteria, similar to a buy to let mortgage. This states that the monthly interest charged cannot be more than the rental income received.
What are the costs involved with equity release?
- Valuation fee dependent upon the value of the investment property
- Application fee which can be added to the loan
- Solicitors legal fees
- Lifetime fixed monthly interest rates of 6.39% (age 55-80) & 6.55% (age 81+)
- Early repayment charges only 5% for the first 5 years. No charges thereafter.
- Any advice fee charged by your equity release specialist
Practical uses of the New Life Landlord buy to let mortgage?
The equity release funds can be utilised in many ways.
With market opportunities growing in the rental market as house prices fall & yields increase, bargains are there to be had. Should any residential landlord wish to expand their portfolio & have concerns over the expense of buy to let mortgages they can consider schemes such as this.
Should a potential landlord spot a new investment opportunity, but has limited capital for deposit, then landlord equity release schemes could assist. The borrower could review all properties under his portfolio & by using an equity release calculator; assess how much could be released individually to meet the shortfall required.
Additionally, with the age group eligible for this buy to let mortgage there could be tax implications. Therefore, should some of these assets need to be disposed of, rather than selling the property & incurring capital gains tax, then equity release can be undertaken instead.
Finally & the most common purpose for this could be for debt consolidation purposes. Should financial difficulties arise on a buy to let mortgage or other personal finances, then subject to the amount that can be released, these debts can be repaid.
Perhaps one has just had enough repaying a buy to let mortgage & would rather receive the gross rental income to support their retirement?
The uses of the New Life Landlord scheme can be many; so to discuss how the features of this unique buy to let lifetime mortgage can benefit you contact the Equity Release Supermarket team on 0800 678 5159 or email firstname.lastname@example.org.