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Lets Get Started: Santander Equity Release In A Nutshell
For Santander customers with Interest-Only mortgages, you may be interested to know more about the Santander Equity Release Scheme.
- Santander’s equity release is run in partnership with Legal and General
- Legal and General have appointed Key Retirement as advisors for Santander’s Equity Release
- As part of Legal and General’s push into the equity release market, they have a tied distribution deal in place with Key Retirement. It’s offered through “The Retirement Lending Advisers” (TRLA)
As TRLA have a tied distribution deal with Legal and General, it means for existing customers of Santander looking to raise cash into retirement or to pay off an interest-only Santander mortgage; you could save on arrangement fees by going through The Retirement Lending Advisors. However, as they have a tied distribution deal, you won’t be getting a whole of market comparison to see if the Santander Equity Release scheme is the best option for you. According to Legal and Generals Santander information brochure for existing customers, the average fee was £1,134, unless Santander customers opt for The Retirement Lending Advisers service, which doesn’t charge because of the tied distribution deal.
The downside to that is you wouldn’t know what other equity release companies would be offering as TRLA and L&G, have a tied agreement in place for distributing the Legal and General Lifetime Mortgage.
The bottom line is that Santander Equity Release Schemes don’t exist. Instead, Santander has opted to partner with Legal and General, who have since partnered with Key Retirement. Key Retirement operates The Retirement Lending Advisers Service.
Legal and General equity release schemes are open to anyone over the age of 55. The only difference with Santander equity release schemes is the terms will differ, as will the advisory fees, depending on which financial advisory service you choose.
At 1st UK, we are independently run and do not have any distribution deals with any equity release company, meaning we can compare the whole of market and give you independent and impartial advice, whether you’re a Santander customer or not. If you are, we will review the various offers Santander, TRLA and Legal and General have and let you know all your options.
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How Santander Customers Can Benefit from L&G Lifetime Mortgages
Santander identified a number of their older customers on interest-only mortgages who were facing a shortfall on their endowment policies. To offer customers an alternative solution to pay off their mortgages and to help raise funds into retirement, they have partnered with Legal and General.
The Lifetime Mortgage from Legal and General, in partnership with Santander, must be used to pay off an existing mortgage, which will include any early repayment charges, where applicable.
Should you choose to opt into Santander’s Equity Release Scheme, you’d essentially be moving your interest-only Santander mortgage to a Legal and General Lifetime Mortgage. In doing so, you’d shift from being on a residential mortgage to a lifetime mortgage.
A lifetime mortgage is repaid differently from residential mortgages, as it’s paid from your estate when you die, or when both residents of the property move into a long-term care home.
Legal and General’s lifetime mortgage can be repaid in one of two ways, depending on which plan you choose:
- Flexible Lifetime Mortgage
- Optional Payment Lifetime Mortgage
On the Flexible Lifetime Mortgage plan, there is no interest to pay upfront or ongoing. All the interest will accrue on a monthly basis. The Optional Payment Lifetime Mortgage plan will let you pay some of the interest that accrues each month, up to an agreed limit.
As interest is compounded, it can increase the total amount owed fast. However, as Legal and General are members of the Equity Release Council, they do give you the No Negative Equity Guarantee, which ensures that when your loan term ends, there will be some money left to your beneficiaries. It will be a reduced amount, which is why you can only opt into an equity release scheme through an advisor. There are no equity release companies able to sell these types of mortgages directly.
Eligibility Criteria For Santander Customers Interested in Legal & General Lifetime Mortgages
- Applicants must be at least 55 years of age
- The property must be valued at £100,000. Ex-housing association, ex-council and ex-Ministry of Defence properties have a higher minimum home valuation of £150,000.
- The property must be owned, or the money raised from the Lifetime Mortgage must be used to repay an existing mortgage, including any early repayment fees.
Properties must be well-maintained, in a good state of repair, built of standard construction, and not have any tenancy restrictions in place.
As with all lifetime mortgage products, there are no affordability assessments. The amount you can borrow will be determined by your property valuation, your age at the time of application, and whether you’re applying solely or jointly.
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Fixed Sums or Staged Release Funds Available
Legal and General offer customers two options to release equity from their homes. You can choose to take a fixed lump sum payment or to use drawdown, which lets you take out an initial lump sum payment leaving some funds available to withdraw in the future.
Should you choose to use equity release drawdown, the only interest to be added to your mortgage will be on the initial money paid out. Not what’s approved and left on reserve to use in the future.
As an example, if you were approved for a £50,000 lifetime mortgage, and took out £10,000, leaving £40,000 on reserve, the interest would be payable on the £10,000 and not the whole £50,000.
If you were to choose the Optional Payment Lifetime Mortgage, you could pay some of the interest monthly. If, on the other hand, you choose the Flexible Lifetime Mortgage, interest roll-up would be used, and you wouldn’t pay any interest. Instead, the interest will still accrue monthly and be repaid upon the death of both homeowners, or when both people move into a long-term care home and the property is sold.
You remain the homeowner with Santander’s Equity Release Partnership with L&G. That said, it is not without its risks. During the term of a Lifetime Mortgage, you must abide by the terms set out in your initial mortgage offer. This will include keeping your home in a good state of repair and continuing to use your home as your primary residence; therefore, you will not be able to let your property out, despite holding 100% equity in your home.
Things to know about the interest charged
Interest is applied on the loan amount plus previous interest so each month there will be compounded interest. What this means is you pay interest on interest. £10,000 at 5% interest would add £500 in interest. The next cycle would see 5% interest charged on £10,500, adding £525 in interest charges. As you can imagine, compounded interest can add up fast, which is why you can only apply for a lifetime mortgage after you’ve consulted with a professional equity release advisor who will explain all the ins and outs of offers and advise on any cheaper borrowing methods.
For the Santander Equity Release Scheme, it is intended solely for older customers with existing interest-only mortgages nearing the end of term and where the homeowners are facing a shortfall.
The partnership between Santander and Legal and General offers a way to pay off interest-only mortgages, with the possible option to borrow more for a comfortable retirement.
Our team can discuss all your available financing options, including the Santander partnership with Legal and General, explain all your borrowing options and compare the whole of market to let you know the best deals from the most competitive and trusted equity release companies.
Please note that the Santander logo is a trademark of The Santander UK plc, to which we have no direct affiliation. The equity release firms we work with provide quotes from many providers.
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