Indeed, when it comes to lining up an equity release application for a client so that it can be processed quickly, the sheer variety of properties on the market can throw up unusual issues and delays for advisers.
New-build and leasehold properties can cause delays in the process, posing unique and discrete challenges compared to older or freehold properties. This can be a particularly trying issue when the client is using equity release to purchase property – as we’ve increasingly seen – and the sale of their existing home also needs to be factored in.
It is therefore essential that in these cases advisers manage client expectations and prompt them to provide all the necessary details about their property, by helping them to understand how its features could impact equity release eligibility.
The importance of having a compliant warranty
With new-builds, the single biggest hurdle is often a lack of certification and warranties.
A lender cannot completely underwrite an equity release loan on a new-build until it’s established whether the warranties comply with their underwriting criteria, which each publishes and shares on their website. Advisers need to ensure that their clients have all the relevant identity and banking documents to hand, or they risk a mislaid certificate slowing down the entire process.
As well as ensuring the warranties comply with the lender’s policy, advisers must also determine whether any estate charges or fees are applicable. Questions on these topics tend to crop up later down the legal process and can cause delays to an equity release application if the answers are not quick to hand.
A little bit of due diligence on the particulars can yield huge dividends further down the line.
When underwriting leasehold properties, similar logic applies.
The adviser must still ensure every lease term complies with the lender’s published criteria. In these cases, it’s also vital to gather as much information, not just on the lease term remaining, but also on service charges and ground rents, so the full context to the property is available.
Ask for documentation at the start
Having comprehensive documentation for any equity release application is vital, but the nuances and conditions of new-builds and leaseholds make this especially important in the early stages of the equity release process for these properties.
As an adviser, asking for these details and documentation from a client upfront will not only limit the potential for delays, but will also help to manage expectations about how long an application usually takes, and establish why delays – if any – might happen.
Advising is a nuanced skill, and every property is different. When lenders and their underwriters examine new-build or leasehold properties, they are mostly looking for the same thing: accurate information and a full list of warranties. Some details are different – lease terms are only relevant to leaseholds, and estate charges apply just to new-builds.
However, the general principle of due diligence and transparency applies all the same, and it can save advisers and their clients significant time in an equity release application.
