Introduction to Equity Release
In light of the coronavirus outbreak, some product options have been removed and property criteria may have changed temporarily.
Hodge launched the first equity release plan back in 1965. It was pivotal in creating the later-life market we see today. Since then, our product has grown based on our clients’ requirements.
Equity release from Hodge is designed to offer flexibility and choice to suit your client’s needs. All our mortgage products have the option to make 10% overpayments entirely penalty free from day one. Find out all you need to know about our Retirement Mortgage, and equity release hybrid mortgage, offering interest-only repayments.
You will need a relevant equity release qualification, to recommend any of these products. All products adhere to the Equity Release Council’s SHIP Standards.
Our Choice of Equity Release Products
Hodge is committed to delivering flexible options to your customers and, with this in mind, we offer several different versions of our equity release mortgage to suit each client’s circumstances.
For more information on these options please see our Equity Release at a Glance Guide.
The main factors we use to assess your property’s eligibility for equity release include type of property, construction method and past events.
• Houses (freehold or leasehold)
• Bungalows (freehold or leasehold)
• Flats (leasehold)
• Maisonettes (leasehold)
If the property is a house there must be a minimum of 250 years unexpired term on your property’s lease.
If the property is a flat there must be 115 years unexpired term on your property’s lease
If the property is a flat, it must be in a private block of 10 storeys or fewer.
The property must be of standard traditional construction:
The property must be of traditional construction
- Walls: brick , stone, rendered block, or modern timber frame (post 1970) with a brick, stone, rendered block external walls.
- Roofs: slate, stone, concrete tiles, clay tiles. Flat roof max 50% of area, with covering of fibreglass, lead, copper or asphalt.
The property must not have recently been affected by flooding, subsidence or other structural issues.
This table is only a summary. If you have any questions around the client’s property eligibility please contact us and we will be happy to help.
|Lump Sum Lifetime Mortgage||Flexible Lifetime Mortgage|
|Product benefit||To provide a tax free cash lump sum||To provide a tax free cash lump sum and an option to make further cash withdrawals|
|Current interest rate for standard range (AER)||Between 3.90% and 4.30% depending on product chosen||Between 4.05% and 4.45% depending on the chosen option.
|Interest rate type||Fixed rate for life||Fixed rate for life|
|Interest rate guarantee||n/a||n/a|
|Overall cost for comparison for standard range||Between 4.04% and 4.37% depending on the chosen option.||Between 4.20% and 4.52% depending on the chosen option.
|The actual rate available will depend on your client’s circumstances. Ask for a personalised
|Additional features||All lifetime mortgages offered by Hodge include the Flexible Repayment Option where up to 10% of the initial amount borrowed can be repaid each year with no early repayment charge.
Downsizing Protection – You will not incur an early repayment charge if you repay your loan as a result of selling your home and moving to a different property.
|Cash withdrawal option||No||Yes – minimum withdrawal amount of £1,000 per transaction|
|The cash withdrawal option is not guaranteed|
|Minimum age (youngest applicant)||55||55|
|Maximum age (youngest applicant)||88||88|
|Minimum property value||£120,000||£120,000|
|Maximum property value||£2 million||£2 million|
|We may accept properties of more than £1 million on referral|
|Standard loan to value (on youngest age)||15% – 48%||15% – 48%|
|Minimum loan||£20,000||£15,000 plus £5,000 cash withdrawal option|
|Product fee||Fee free and £595 options available||Fee free and £595 options available|
|Early repayment charge||Maximum 25% of capital repaid. Note that swap rates are used in calculating part of the ERC.||Maximum 25% of capital repaid. Note that swap rates are used in calculating part of the ERC. Click|
|Locations available||England, Wales and mainland Scotland||England, Wales and mainland Scotland|
The following interest rates apply for making cash withdrawals
|Product||Current interest rates||Overall cost for comparison|
|Flexible Lifetime Mortgage||3.74% monthly||3.94% APR|
|Flexible Mortgage Option*||6.75% monthly||6.50% APR|
|Flexible Lifetime Mortgage Plus*||4.07% monthly||4.29% APR|
The VRC is an early repayment charge that applies to selected variations of the Lump Sum Lifetime Mortgage and Flexible Lifetime Mortgage. We put in place fixed rate funding to match the expected duration of each fixed rate loan and the VRC is calculated to reflect the cost of the mismatch that arises if a loan is repaid earlier than we expected.
More information about the VRC, and the formula we use to calculate it, can be found in our Equity Release Product Summary and our Early Repayment Charges factsheet. You can also calculate the VRC under different scenarios by using our Equity Release Calculators.
What is a 25-year swap rate?
The 25-year swap rate is the rate quoted in the money markets for borrowing funds at a fixed rate of interest over 25 years. Hodge Lifetime’s funding costs are therefore determined by this rate, as the expected duration of lifetime mortgages is around 25 years on average.
Where does swap rate data come from?
We aim to make the VRC calculation as transparent as possible. Swap rates are set daily based on traded prices in the financial markets. Whilst this data is not publicly available, we will publish the relevant data at the start of each month on our website (see below).
How do we use the 25-year swap rate?
We set the 25-year swap rate on the first working day of each month (to reflect the swap rate published the previous working day).
When a loan is redeemed early, we will look at the swap rate that applied in:
- The month the loan was taken out;
- The month the loan is repaid.
If the rate has fallen between these dates, this fall will be used in the VRC formula. We will guarantee each VRC calculation for two weeks from the date it is prepared.
25-year swap data
The table below shows the 25-year swap rate we set on the first working day of each month (being the rate as at close of business on the previous working day):