Having chosen a career within the mortgage industry, you will have committed to completing the training required to remain compliant and effectively establish a customer’s needs, assess how you can help, and best advise the most appropriate solution.
One of the areas you may cover with your customers, dependent on their circumstances, is equity release. It is not something that is offered by all lenders, and you will be governed by your employer’s processes and procedures, as well as the regulation set by the Financial Conduct Authority (FCA).
What is equity release?
Equity release is a way of releasing money from the available equity in your home, paid as a tax-free amount and generally available to those who are of post-retirement age. It can provide home owners with the funds to ability to top up their pensionable income, or perhaps a lump sum amount to complete much-needed home improvements or take that holiday of a lifetime.
Equity release is not suitable for everyone. It is dependent on someone’s eligibility, and how they are looking to use the money. It is important that borrowers pursuing this route are fully aware of the facts before making a decision to proceed, and your job as a mortgage advisor is to establish the need and advise accordingly.
Pros
For customers who are eligible, equity release can allow them to enjoy their retirement without having to sell and downsize their property, leaving precious memories behind.
Borrowers have the choice of receiving the funds as a lump sum or monthly amount, and the money can be spent as they wish.
Equity release means that homeowners can stay in their home until such times as they may need to move to a care facility, or if they should die.
There is sometimes the option to release additional equity in the future if it is required, and they can initially apply for an amount starting from £10,000.
Cons
It is important that the homeowner considers all information relating to the equity release before deciding to go ahead with it.
The interest can accrue and accumulate quickly, which ultimately may impact on the inheritance being left to family members in the event of the homeowner’s death, as it will reduce the equity owned.
Releasing property equity may reduce the state benefit entitlement. Finally, there is generally a penalty if the debt is repaid within a 10-year timescale, and it may mean that if further monies are required, the request is declined.
