Time is of the essence for equity release purchase cases
Stuart Wilson is corporate marketing director at more2life
The latest more2life data has revealed that the proportion of over-55s who have been using equity release to fund a property purchase has tripled from 5% in ‘normal’ market conditions to 15% since the outbreak of the pandemic.
This enhanced buyer appetite has primarily been fuelled by the Stamp Duty Land Tax (SDLT) holiday, which has caused one of the biggest upticks in property market activity in recent memory.
However, while this spike in demand is a fantastic sign of market resilience, it does lend an added layer of complexity at a time when many advisers are already stretched.
So how does equity release for purchase work? Essentially, the client releases equity on the property they are purchasing to boost their buying power – often because they have found that their dream retirement home may be well smaller but not necessarily cheaper.
While the concept is fairly simple, the process needs to be even more carefully managed than standard residential property transactions and does typically take more time.
Indeed, industry insiders are already warning that if your client has not yet started the process, promising a pre-July completion is more optimistic than accurate.
Under the current plans, SDLT will not need to be paid on properties worth up to £500,000 until 1 July 2021 and then until 01 October 2021, SDLT will not need to be paid on properties worth up to £250,000.
For someone who is purchasing the average property used for equity release (£366,660), the difference between completing on 30 June and 1 July is £5,833, which is not inconsiderable for someone who is retired.
So what can advisers do to help clients who are moving through the process to complete as quickly as possible?
Organisation is key and time is of the essence so collating client documentation quickly is vital – especially as conveyancers are reporting longer than normal turnaround times as everyone races to meet the deadline.
Special conditions should be acted upon as a matter of priority to prevent delays and additional requirements around certain property features such as septic also need to be addressed quickly.
The insurance certificate will also need to be included in the initial pack for the client’s solicitor, and it is vital that the client’s solicitor sends all the information that the conveyancer needs first time in order to reduce the number of queries raised.
Ensuring that you have regular contact with the conveyancer is important to avoid bottlenecks and last minute delays.
Advisers also need to manage clients’ expectations and set them up for success. If they are just at the start of the process, the September deadline is likely to be more realistic and achievable – especially if they use a solicitor who specialises in equity release.
Reports suggesting that this approach can mean people complete up to five times quicker.
Furthermore, advisers should also flag any key details to the lender at the start of the process, such as the need for Lasting Powers of Attorney, to manage potential delays.
This is especially important for more complex cases that are likely to need specialist support and therefore a longer timeframe.
Advisers should also instruct assent cases and lease extensions as purchase matters on the application form.
Advisers commonly list these as remortgages, but this should be avoided to limit delays and confusion.
It won’t be easy but following these steps and managing clients’ expectations will help to ensure that not only will the process go smoothly but it is less stressful for all concerned.