Self-employed borrowers have an appetite for equity release

Michael Lloyd

August 15, 2018

There has been a rise in the number of self-employed customers using equity release, the Equity Release Supermarket has seen.

Gary Webster, head of partnerships at the Equity Release Supermarket, has noticed a shift towards self-employed customers who are still working in their mid-60s moving off interest-only, struggling to get a conventional mortgage that suits their circumstances.

He said: “Some of these products are being designed quite deliberately to mirror conventional mortgages, there are more funders in the market who are creating more flexibility and helping advisers to attract clients with positive pricing.

“Whilst some borrowers struggle to get a retirement interest-only (RIO) mortgage because it’s based on affordability, an increasing number of self-employed customers really like the features that lifetime mortgages have to offer.

“We’ve positively got customers now choosing lifetime over conventional mortgages because for some they’re more flexible. Some schemes now allow customers to pay interest by direct debit and other plans come with voluntary overpayment options.

“Consumers don’t really know about them but when we discuss what features are available, they’re amazed. Whilst not built specifically for the self-employed, these plans have evolved to meet the needs of the older working borrower and their longer-term planning.”

Mark Gregory, director of Equity Release Supermarket, said the key thing is that the customer is in control of what they pay back and when.

He said: “They don’t have to worry about making regular monthly repayments and their house being repossessed because they can start and stop at their leisure.

“The only downside is if they don’t make any payments, interest will roll-up but that’s how equity release works anyway. But at least they’re in control of it and it’s up to them what they do.”

Webster highlighted that many self-employed customers took interest-only mortgages out 20 years ago or more when they didn’t have income verification and now have no repayment vehicle in place.

He added: “Without lifetime mortgages there is no doubt some of our clients would have had to sell their property and downsize. The only way some of these clients are remaining in their homes is via a lifetime mortgage so it is a force for good.

“We always assess client needs and will absolutely advise on retirement interest-only mortgages if it’s the right product for the consumer.”

Gregory said even though he can’t foresee RIOs becoming a massive part of the market; it’s there for some and has its place in the later life sector.

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