EQUITY GUIDANCE ON THE SUITABILITY OF EQUITY RELEASE

Some guidance as to when Equity Release schemes are likely to be more suitable or less suitable for you.

Potentially Suitable
• You are aged over 60 and have an immediate income or lump sum requirement that is specific and not general. All the other options available to you, including conventional mortgage products, have been fully reviewed and discounted. Suitable circumstances could be:
- You have few liquid assets and wish to fund, say, the deposit on their children’s property purchase, a once in a lifetime trip or a holiday home purchase, but do not have capital available or sufficient income to support other forms of mortgage or borrowing.
- You require an increase to their income to cover their normal expenditure.
- A client with few liquid assets who wishes to carry out some home improvements, for which a grant is not available.
Obviously these are just three scenarios and we encounter many others in your dealings with our clients. The key to establishing suitability in any scenario will be a clear and quantifiable need for the funds and an ability to discount the alternatives thoroughly.

Not suitable
• Borrowing to invest for capital growth or estate planning including IHT planning.
• Borrowing to invest a lump sum for immediate income.
• Where clients have the ability to source an income or lump-sum need from other sources, for example by downsizing their home, selling or drawing an income from investments or other assets, a grant from the local council or The Home Improvement Trust for home improvements, or by claiming entitlement to additional state benefits.
• A number of clients will be able to downsize to release capital which can then be used to fund an income, but may not want to. In these circumstances it is important to record the fact that this option was reviewed and discounted.

For further information, please call us on tel: 01268 573 306 or email us

EQUITY MORTGAGE RELEASE - Not suitable cont..

• Where the client’s tax/income position will be significantly affected by the planning. In particular, care is required where clients are entitled to means tested benefits, such as the Pensions Credit, Minimum Income Guarantee (Income Support) or Council Tax Benefit. In general terms, the greater the level of benefits lost as a result of the Equity Release, the more difficult it will be to justify the recommendation.

When the clients have the ability to receive a loan from their children or other friends/relatives. In this scenario, both parties should be advised to take separate legal advice.
• The clients are below the minimum age for a Lifetime Mortgage or Home Reversion Plan - normally age 60.
• If the clients wish to consolidate debts, often they may be better off by not entering into Equity Release and should seek advice as to their other options first. Depending on the number and amount of the debts involved, these options may include involving their local Citizens Advice Bureau for advice on debt management.
• The clients’ main need is to pass the full value of the property to their children or other beneficiaries on death.
• Where one spouse is much younger, making it necessary to amend the deeds of the property to remove the younger spouse to allow the release of equity to proceed. In this case, on the death of the older life, the younger spouse would be significantly worse off or even homeless. Equity Release in these circumstances is almost never going to be good advice.
Again, this is not an exhaustive list, but does cover some of the main reasons why Equity Release products can be unsuitable.