EQUITY RELEASE: Give your application the best chance with this essential guide

EQUITY RELEASE: Give your application the best chance with this essential guide

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Borrowers may use the Equity Release funds for any purpose they like [FILE PIC] (Image: Westend61/Getty Images)

Don’t limit yourself to applying to one lender, shop around for quotes and use a broker. The Financial Conduct Authority actively encourages this. Credit ‘scoring’ does not happen in Equity Release, only credit ‘checking.’ The market currently has over 230 plans of available from 9 lenders, so it’s vital to seek independent financial advice. Most crucially, your chosen adviser must be a member of the Equity Release Council and you can check this by visiting the Council’s website; https://www.equityreleasecouncil.com/membership/find-a-member/

Only then can you be sure that your adviser is prepared to uphold the rigorous standards of advice that membership of the Equity Release Council requires.

Generally speaking, borrowers may use the Equity Release funds for any purpose they like, whether that is clearing debts, making home improvements, spending on pleasure, or making gifts of the money. 

Lenders have to know the use that their money will be put to by borrowers. This is partly to help improve their future marketing success of course, but also to prevent fraud; either against the lender, or in helping the customer to avoid becoming a victim themselves.

Lenders have to satisfy the regulator that they are lending responsibly. It’s a sad fact that the retired population are a prime target for scammers and fraudsters, so lenders quite properly will take steps to minimise the risk to their customers.

To get a loan typically typically takes around 4 weeks for a straightforward case, with more complex cases taking perhaps an additional 2-6 weeks. 

If a deputyship order form the Court of Protection is involved, or a power of attorney is handling matters, additional checks and procedural requirements inevitably take time. Most clients receive a formal Lifetime Mortgage Offer fairly quickly within just 1-2 weeks, whereas the following legal stage generally takes longer, but for good reason, and that is to protect the borrower’s and the lender’s respective interests.

Homeowners who have lived in their property for many years often don’t appreciate that their deeds must now be registered electronically with HM Land Registry. It’s a simple process for a solicitor to handle (registering a title), but queries are sometimes thrown up due to plans needing to be updated.

Many people are not aware of the importance of their full names being correctly stated on all documents relating to the Equity Release. It’s not unusual to see title deeds missing a person’s middle name for example, which must then be corrected to match identification such as a passport. Little issues like this can cause short delays, so it’s always worth getting it as precise and accurate from outset of an application.

Another common occurrence is a homeowner not remembering that they might have a small charge held over their property, with a past mortgage lender, or from legal aid granted for a divorce many years before. Anything like this needs to be settled and removed from the title before or on completion of an Equity Release arrangement.

An Equity Release specialist adviser should go through your finances with you, so it’s a good idea to be prepared for any meeting with details of your income and outgoings, any debts, savings, pensions, investments, and state benefits all to hand. 

A good adviser will want to know these details, so that they can be certain that Equity Release is the right way of helping you achieve your objectives. You should always be wary of an adviser that doesn’t ask sufficiently detailed questions as it’s their job first and foremost, to tell you straight if they feel Equity Release is not right for you.

Having a clear idea of how much money you would like, when it will be required, and what it will be used for is also very helpful. A good adviser will explain how much you may be able to release and ensure that you aren’t borrowing more than you need, or taking money prematurely. The popular ‘drawdown’ type of Equity Release Lifetime Mortgage can be really useful if you have a number of things you need money for at varying points, as you are only charged interest on money actually taken.

If you cannot understand a Lifetime Mortgage Offer, reject it. Lenders make great efforts in trying to keep their plans clear and easily understood, but like any legally-binding contract, sometimes terms can be difficult to digest. Your adviser and solicitor ought to be able to explain in simple everyday language what you will be singing up to; no fancy jargon or technical terms should be used. If you feel uncomfortable or uncertain, choose another adviser.

A skilled and experienced adviser should not be afraid to broach the matter of death with you. After all, it is inevitable and a Lifetime Mortgage is called just that because the death of the borrower (last one if you are part of a couple) brings about the end of the loan.

If you are taking advice as a couple, the adviser should ask what either of you would do if you lost the other first. Advisors often see couples who say they will never move home, but on asking the same question to them separately, it’s quite usual to have one say they would look to move home, perhaps to be closer to their family or just to have a smaller property that is more easily looked after. These sorts of changed can be readily accommodated with the right Equity Release plan, but the wrong one could prove to be inflexible or costly to get out of.

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The market currently has over 230 plans of available from 9 lenders (Image: Nicholas Free/Getty Images)

If the loan is already in place, then it is unaffected by the first borrower’s death or move into long term care. Therefore, the survivor can freely take further releases of cash if they need to, provided that their deceased partner’s share of the property has been left to them.

If, however, the property was owned as ‘tenants-in-common’ with the deceased person’s share now owned by others (the children usually), then further releases are entirely at the lender’s discretion. Most lenders will sympathetically consider offering more money, but will likely require the consent of the new co-owners.

If the loan is at the point of having been offered but yet to complete, and one of the applicants suddenly dies, the it would be best to hit the pause button whilst you consider your change of circumstances. It could be that better terms are now available, certainly if you happen to be older than your lost partner. Once again, a good adviser would help you deal with the situation and not look to force you into completing without carefully considering all options open to you. 

You may be able to press ahead as initially planned but you should always take sound professional advice because the period following a bereavement is not usually a good time in which to be making decisions that can affect your future.

If the property was held jointly as ‘joint tenants’ (the most common way of owning a property together) then completing on the release should not take much longer. The lender would simply amend the application (or mortgage offer) accordingly, and production of a Death Certificate would normally satisfy them. If the property was held as ‘tenants-in-common’, then your solicitor will need more time, as probate will be necessary for them to transfer the deceased person’s share over to the surviving person before completing on the Equity Release.

A lender might consider it would be sensible for the surviving person to take fresh independent financial advice, as someone in a state of bereavement could potentially be considered to be vulnerable.

www.laterliving.com

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