The Halifax retirement home Plan has been withdrawn on 17th August 2011 & is no longer available to new borrowers. For clients still holding the Halifax Retirement Home Plan mortgage and wish to borrow additional funds or move house then please call us on 0800 321 3156.
What is the history of the scheme?
The Halifax Retirement Home Plan was established in 1984 with a view to provide low cost mortgage finance for old & retired people. Under the pre FSA regulatory regime the branch network would be able to advise & offer the Halifax equity release plan. It enabled people in, or near to retirement to release equity that was tied up in their home on a remortgage basis, or use the interest only lifetime mortgage to facilitate a new house purchase.
The scheme can now be only advised by qualified lifetime mortgage advisers with the regulatory equity release licence. Even the Halifax branch network cannot & will not give advice or process a Halifax Retirement Home Plan application.
What is the Halifax retirement home plan?
Simply stated, this lifetime mortgage UK scheme is meant for people who are retired and is primarily a pensioner mortgage scheme. The basis of this mortgage in retirement is the same as that of a conventional mortgage; however the main difference being that only the interest & no capital is repaid. Therefore, as long as monthly payments are maintained the balance of the lifetime mortgage will always remain the same.
This can be favourable for potential beneficiaries who are concerned about their inheritance. As the balance will remain level then they will know in advance exactly how much will need to be repaid on the eventual sale of the property. This would be either on death or moving into long term care.
Halifax retirement mortgages need to be repaid by monthly direct debit, the amount of which will be determined by the size of the loan & the product selected by the customer. This could be a tracker rate which is currently as low as 2.49%. An example of this rate on a £50,000 mortgage would result in a monthly payment of only £103.75. (4.0% APR).
The alternative product is a fixed rate which can be over 2,3 or 5 years. The lowest 2 year fixed rate is currently 3.09% & again on a £50,000 mortgage would equate to a monthly payment of £128.75.
Finally, there is no set term as the mortgage will run until there is no one living at the property. This would be on 2nd death or the 2nd person moving into care.
The release of the funds could be for anything: -
It mainly enables the release of equity which is tied up in the property and can be used to move house whenever a retiree is considering downsizing or can even be used to move up market. In moving up market the Halifax Retirement Home Plan can be used to bridge the shortfall between the two property values. We have seen this to be of assistance to people wishing to move into a more expensive bungalow or even a residence near their children which maybe in a more affluent area for house prices.
Other reasons why Halifax interest only mortgages are a popular means of enhancing one's retirement are: -
- Paying off debts
- Holidays and excursions
- New cars or upgrade
- Renovations to the home
- Gifting to the children
The minimum age to qualify for the scheme is 65, however discretion is given to anyone over age 55 who can borrow sufficient funds based on their retirement income alone. This income must be either pension income, means tested benefits such as pension credit. Disability living allowance (DLA) is also permitted as is attendance allowance, industrial injuries benefit & rental income.
What is the limit of release?
The minimum release is £15,000 but the maximum release is not defined directly. There is a formula to derive the maximum release with the help of an intermediary Halifax affordability calculator. The decision is based on whether the interest of the mortgage can be afforded even after retirement. The data required for the calculation are a string of factors like income, credit check & credit score with the number of applicants and credit commitments also affecting this interest only mortgage calculation. The maximum release, however, cannot exceed seventy five per cent of the value of the property.
Can the mortgage be paid off early?
Yes, it can. Unlike a normal equity plan, there is no penalty applied for early repayment of the mortgage. However, the early repayment charge is levied should repayment be done within the term of any tracker or fixed rate period. However, even during this period an allowance of 10% of the amount borrowed can be repaid during this initial product period. After, the tracker or fixed rate has expired then the interest only mortgage repayments will revert to the Halifax standard variable rate which since January 2011 has been 3.99%. At this point there will be again an option to take a new product out from the retirement home plan range at that time.
What is the advantage of the scheme?
The scheme is interest only and requires only a monthly payment of the interest only. The principle will always remain the same in that the Halifax Retirement Home Plan is a cost effective way to provide mortgages for pensioners & enhance their retirement lifestyles.
EquityRelease2go are specialists on the Halifax Retirement Home Plan & any other interest only lifetime mortgages that maybe suitable for you so call us on 0800 321 3156 today.
Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage.