A rise in property values, coinciding with the low interest rate environment, has made equity release a more viable and popular solution for an ageing population, which is ‘asset rich, cash poor’.
We were increasingly approached by older clients who found themselves in a predicament; lenders unwilling to lend because they didn’t have much in the way of income, while they didn’t want to downsize and leave the home they had lived in for many years to free up cash. We decided to enter the equity release market to specialise in arranging mortgages for high-net-worth clients as we were coming across many elderly clients in London with high-value equity release requirements.
To enable us to offer equity release, I took the Certificate in Equity Release (ER1) examination with the Chartered Insurance Institute. The certificate is a practical solution that develops the understanding of the equity release regulation, products and advice process.
Specialist training is required because advising a lifetime mortgage solution is usually a far more time-consuming process than advising on a regular mortgage. The client would usually be classed as ‘vulnerable’ due to their age so in order to recommend a lifetime mortgage a great deal of fact finding is required. The decision to apply for a lifetime mortgage is often a ‘family decision’ and the borrower’s children or family members may often be involved in the advice process so that all potential solutions can be considered. The borrower should also take independent legal advice before proceeding with an equity release mortgage.
The equity release requests that have landed on my desk include a couple in their seventies who required the funds to extend the lease on their Mayfair apartment. Another elderly couple needed to remortgage as they no longer ticked the Mortgage Market Review boxes when their mortgage with a private bank came up for renewal. Another couple in their eighties wanted to explore releasing money to gift to children for their grandchildren’s school fees.
Demand for equity release is increasing and providers are becoming more competitive. An equity release mortgage is a big decision for any potential borrower and even though it isn’t a cheap solution it can still be the right one for certain borrowers.