How equity release still plays a valuable role in clients’ financial planning

By Kay Westgarth, Sales Director, Standard Life Home Finance

This short guide illustrates why the product category remains an attractive option for many and provides the information you need to confidently discuss equity release as a suitable financial solution for your clients in today’s economic landscape.

Your clients have repayment options to manage the loan size

Your clients may have questions about the impact compound interest will have on their loan. But thanks to the flexibility of the features of a lifetime mortgage, they can choose from three possible repayment options, ensuring their plan works to meet their wants and needs both now and in the future.

1. Make no monthly repayments to free up more disposable income, with the loan plus compound interest being paid when the plan comes to an end
2. Make voluntary, ad-hoc repayments, typically between 10–12% each year of the initial loan amount, to help reduce the size of the loan on which interest is charged
3. Choose an interest-payment lifetime mortgage and make regular full or part payments towards the interest each month to reduce the total amount owed at the end of the loan’s life

By having the choice to make regular, ad-hoc, or no repayments at all, your client can tailor repayments to their individual circumstances and have more control over their financial future. 

 

Your client can still move home in the future

If for any reason, your client needs to move to a smaller home in the future, after an 8 year initial qualifying period⁴ of taking out their lifetime mortgage with Standard Life Home Finance, they can pay the loan back early without incurring an early repayment charge if their new property doesn’t meet the plan’s criteria.

At Standard Life Home Finance, we recognise that individual circumstances can change, which is why all our Horizon plans offer downsizing protection from day one.

Your client may be able to remortgage in the future

Although the most common form of equity release is a lifetime mortgage, the plan your client chooses today does not need to be for life, considering the potential option to rebroke in the future, where eligible and believed to deliver the preferred outcome for the client.

Your client may be able to remortgage to a new plan in the future to release further funds, should they need them. If this option was to provide the best outcome and value for your client, it may serve as a solution to meeting needs which have become a priority since their initial release, or enable them to secure a lower interest rate to reduce their total cost of borrowing.

Your client is protected against a potential fall in house prices

Equity release plans that meet the Equity Release Council standards all have a ‘no negative equity guarantee’ which ensures that no matter what happens to house prices, your client can never owe more than their home’s value. 

It also guarantees that no equity release debt can be passed on to their children or grandchildren when their plan ends and eliminates the risk of their house being repossessed.

Your client doesn’t have to take all the money in one go

If your client meets the criteria for a drawdown lifetime mortgage, they can take some of their release now and hold further funds back to access at a later date. 

Meaning, if they don’t require the full amount immediately, they can choose to leave a portion untouched - which doesn’t accrue interest.

Therefore, if lifetime mortgage interest rates were to fall in the future, when your client comes to access those further funds later down the line, they’d be able to release them at the prevailing rate at the time, providing they meet the drawdown criteria.

Getting expert advice

It is a requirement for all consumers to receive specialist equity release advice before taking out equity release, to make an informed decision with regards to their retirement opportunities. Considering the current economic conditions, factors such as lack of financial resilience may be particularly prevalent to your clients now.

Given the pressure your clients may be feeling in the current climate, it’s important for them to consider if they really need to access the whole release amount now, or if they’d be better off by waiting to see if their circumstances improve.

Also, it’s paramount to explain the impact that making repayments has on reducing the amount owed should they be in a position to service the loan, either regularly or on an ad-hoc basis. This will help ensure your client has a better understanding of how to reduce their total cost of borrowing and provide a more personalised customer outcome.

By choosing the right equity release referral partner, you’ll be able to ensure your client receives the right solution for their needs.

To offer your clients a solution for a brighter retirement, explore our Defaqto 5 Star rated Horizon lifetime mortgages today.
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