Chance of a lifetime
Tom Webster is managing partner at Sentry Advice
Demographics suggest that later life lending is going to become a significant driver of growth in your business, and if you are not offering solutions for your clients, you are not only missing an opportunity but also failing them.
There are, however, still a number of myths surrounding equity release products, so how can you bust these myths and what are the ways you can start to use equity release to meet the funding requirements of your clients?
There are few questions around the potential demand for equity release. The OECD says that there will be more than 35 people over 65 for every 100 of working age by 2025 and the ONS says that the total pension liability of the UK is estimated to be £7.6 trillion, which is double the level of GDP.
At the same time, Savills has said that UK housing wealth is now worth more than £7.14 trillion. Releasing some of this wealth could therefore provide a solution for millions of older homeowners who want to boost their income and enhance their lifestyle, but a number of myths continue to provide a stumbling block to the growth of the sector.
Here are some of those myths and the truth behind them.
Myth: I won’t own my home anymore, so I might lose it
Truth: With a lifetime mortgage, people remain the owner of their home.
Myth: I don’t want another mortgage now, I can’t afford the repayments
Truth: With a lifetime mortgage, no repayments are normally required until the borrower dies or goes into long-term care.
Myth: I can’t access equity release as I have a blemished credit record.
Truth: Lending is based on the market value of the property, age and health status of the borrower. Income and credit history are not considered.
Myth: I don’t want my children inheriting a debt.
Truth: The ‘no negative equity guarantee’ means that the debt will never be more than the equity in the property.
Myth: I won’t be able to leave anything to my children or grandchildren.
Truth: It is always a good idea for someone considering equity release to discuss their plans with their close family. There is now the option to take up an equity release product with built-in equity protection that provides an ‘inheritance guarantee’.
Myth: I might not want to stay here forever. Wouldn’t equity release tie me down to this home?
Truth: There are now portable equity release products are available, which could enable a customer to move home and move their product.
We have taken the decision not to offer home reversion plans and only provide advice on lifetime mortgages. We have recently worked with clients on lifetime mortgages to clear a bridging loan, fund home improvements, plan for inheritance tax and provide a deposit for high yielding buy-to-let properties that were able to provide an income for retirement.
Lifetime mortgage products are improving all the time and borrowers now have the option to make some payments towards a loan to reduce their overall cost of interest.
For brokers, if you can dispel the myths about equity release for your clients, this improving product landscape and the wave of demographic demand presents the chance of a lifetime.