Up until the late 1990s people predominantly bought a house to live in as a safe roof over their head and a place to call their own. It had no greater purpose, although it was a valuable asset to pass down to your children if you had them.
Now the role of homeownership is no longer so simple. It now, in turn, provides an ongoing income through buy to let; retirement income through equity release or by using either buy-to-let income, or selling a buy-to-let property, similarly these can also be used as a supplement to one’s pension.
Increasingly, equity in the family home is also being used to fund home improvements, weddings, holidays or to help get children or grandchildren onto the property ladder. Finally, any equity left in the family home increasingly funds life in a care home as the government will no longer fund you if you have more than a certain amount of equity. If you still have anything left to pass to your children after that, then it will be an unexpected bonus.
The changing use of property makes a broker’s job a lot less straightforward than it once was. A thorough fact find is more important than it ever was as it is essential to try to understand the motivators that someone has for a mortgage or remortgage. Finding out what someone’s drivers are is as essential for a mortgage broker as it is for an independent financial adviser, to understand someone’s potential future needs, especially when we get into the realms of lending into retirement or equity release.
It is now essential to know if a borrower has other forms of income or savings, especially if they are older. Are they likely to be able to use this to fund their lifestyle or any emergencies that come along, or are they going to need to turn to the equity in their home to do this, and is it prudent for them to do so? Increasingly it is these factors that are likely to have a far larger role than the rate will, in whether someone has a variable rate or a fix, and how long that is taken out for, especially as rates are increasingly similar.
Done properly, the role of the mortgage broker should not be underestimated either by the outside world or by brokers themselves. Increasingly someone’s future could depend on their ability to buy a home and what they do with the equity.