Has The Halifax Retirement Home Plan Opened The Gateway For Retirement Mortgages?

By Author: David Andrews
Total Articles: 197
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With the Halifax branch network unable to advise on this unique lifetime mortgage since 2006, it has been left to independent financial advisers such as Equity Release Supermarket to advocate its relevance.

Not a day goes by without an enquiry on the Halifax Retirement Home Plan as people are asking whether it can truly exist.

The simple answer to that question is a resounding YES & this article will help to explain: -

1. Summary of the scheme

2. How do I qualify

3. What income do Halifax use to calculate how much I can borrow

4. Products & interest rates available

5. What can the mortgage funds be used for?

Quite simply, if you have retirement income from any age then the Halifax Retirement Home Plan could be available for you.

Summary

The plan in essence falls under the category of interest only mortgages for pensioners & can financially help people who feel their retirement income needs a timely boost. This Halifax equity release scheme is a combination of a residential mortgage & a roll-up equity release.

The reason for this is that ...
... qualification is determined by income, similar to a residential mortgage with the interest accruing being repaid on a monthly basis. The similarity to equity release schemes is that the plan effectively has no end date & is therefore repaid on the eventual sale of the property, whether this is on death or moving into long term care.

To summarise, the Halifax Retirement Home Plan mortgage allows you to raise tax free cash on your home with interest being repaid by monthly direct debit. This is the main difference compared to roll-up equity release as the Halifax Retirement Home Plan will always maintain exactly the same balance. Therefore, if you borrowed £50,000 today the final repayment from the estate will still be £50,000. In contrast equity release has NO monthly payments & therefore the balance will increase over time thus eroding the inheritance beneficiaries will receive.

Qualification

Halifax lending criteria states that it is only available from age 65; however I have processed applications where clients have been over 55 & had to retire early through ill-health, injury or redundancy.

From there, we need to assess the remaining criteria which are: -

1. Property value

2. Lump sum requirement

3. Existing finance - Mortgage, loans, credit cards

Although there is no minimum valuation, the maximum that can be borrowed on the Halifax Retirement is 75% of the property valuation. However, this is subject to income which is the fundamental basis of how much can be borrowed.

The Halifax's view of pensioner mortgages is that it should be based on affordability, rather than income multiples. Hence before any application can be processed, it is a worthwhile exercise to conduct an affordability calculation which your experienced Equity Release Supermarket advisor can complete on your behalf. This will include submitting details such as breakdown of income, monthly commitments towards loans/credit cards, anticipated credit score & the loan amount. The result is very accurate & can be used as the basis of the Halifax Retirement Home Plan application.

This Halifax interest only mortgage can only be released by way of a single lump sum; therefore no drawdown facility exists, unlike a roll-up equity release scheme. If additional funds are required in the future then a further advance can be applied for subject to underwriting at that time.

Any outstanding finance by way of personal loans, HP, credit cards etc will be taken into account when calculating the maximum release available. If they are not being repaid via consolidation, then it will reduce the amount that can be borrowed. However, if they are to be repaid on completion of the new Halifax mortgage, then their existence will not affect matters.

What income is acceptable?

All retirement pensions are eligible at 100% including occupational, personal & state pensions. However there are also additional forms of income that can be acceptable. Halifax does offer a degree of flexibility in this area & the following are guidelines as to which alternative income & percentages thereof that can be used towards the affordability calculation: -

Pension credit 100%

Industrial Injuries Benefit (guaranteed) 100%

Attendance Allowance 60%

Disability Living Allowance (DLA) 60%

Rental Income 60% (discretionary)

Investment Income 0%

Fixed rate or tracker?

With the minimum mortgage being £15,000 how do you decide which product from the Halifax mortgage range to select? Well, another benefit of the Halifax Home Retirement Plan is the accessibility to the standard mortgage product range. However, this will depend on the loan to value & whether applying for a remortgage or purchasing a new property. Halifax tracker mortgages currently run over 2 or 3 years with deals starting at just 2.59% over 2 years.

Alternatively, if one is looking for peace of mind that monthly payments will remain exactly the same, then fixed rates are also available. Fixed rates can over 2, 3 or 5 years with interest rates starting at 3.09% for a 2 year fixed, rising up to 4.99% for the 5 year fixed.

With interest rates looking to remain at a low level well into 2011, the tracker deals currently represent the most popular option. However, the most appropriate product will depend on your circumstances & this is why an independent financial advisor should be involved in the decision making process.

What can I spend the money on?

These Halifax mortgages for pensioners can be used for any purpose! However, the most popular applications we process are for debt consolidation purposes including repayment of mortgages, loans, credit cards & bank overdrafts. By repaying these debts has the effect of reducing monthly outgoings, but increases disposable income, thus effectively improving the quality of life during retirement.

Other reasons for Halifax Retirement Home Plan applications are house purchase, gifting to children for business purposes or helping them onto the property ladder. Home improvements are also common as it enables upgrade to the quality of the house or adaptations for disability reasons.

We do not normally recommend this Halifax equity release scheme for investment purposes as the interest rate charged is likely to be higher than the interest rate being received on the investment. However, creating a small emergency fund at the bank is certainly feasible as it will provide immediate access to capital, should it be required in the future.

Again, for quality financial advice on the Halifax Retirement Home Plan or any alternative options on releasing equity in retirement, contact the Equity Release Supermarket team on freephone 0800 783 9652.

Our award winning website can also be visited at http://www.equityreleasesupermarket.co.uk

Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage.

The author of this article has expertise in Halifax Retirement Home Plan. The articles on Equity Release reveals the author's knowledge on the same. The author has written many articles on Halifax Retirement Home Plan as well.