Along with these new products, comes the continued need to discuss affordability and deliver an outcome that suits your clients circumstances both now and in the future.
Better questions, better outcomes
When discussing affordability and identifying your clients’ appetite to make payments, you could unlock more options for them and hopefully deliver a lower cost of borrowing. Whether your clients are able to make ad-hoc voluntary repayments or commit to an interest-served product, it’s importance to discuss both their current and future level of affordability to identify the most suitable solution for their unique circumstances.
How much could your clients save by making repayments?
It can be challenging to recommend making repayments during the advice process if a client is looking to equity release as a way to help cut their monthly expenditure.
However, even a small contribution can go a long way. And depending on their current circumstances, they may be able to significantly reduce their total cost of borrowing.
Case study example: The big impact of a small repayment
Mr and Mrs Lawson are looking for a way to help boost their finances and supplement their pension as they approach retirement. After speaking with their financial adviser, they decide they want to access some of the wealth in their property but make repayments to reduce their total cost of borrowing and leave a sizeable inheritance for their children.
Mr and Mrs Lawson wish to release just over £70,000 from their property and using Standard Life Home Finance’s Voluntary Repayment Calculator, their adviser is able to demonstrate the impact of making repayments that align with their affordability.
| Property value: £281,373 | |||||
Release amount: £70,343 |
|||||
| Monthly repayment |
Total cost of repayments (15 years) |
Total cost of borrowing with repayments | Remaining equity after 15 years* |
Gross saving | Net saving after repayments |
| £0 | £0 |
£211,140 | £151,517 | £0 | £0 |
| £50 | £9,000 |
£194,800 | £131,857 | £16,340 | £7,340 |
| £100 | £18,000 |
£178,461 | £148,196 | £32,679 | £14,679 |
*Including 1% annual HPI
As demonstrated above, Mr and Mrs Lawson are shown that even modest payments can significantly reduce their total cost of borrowing. By repaying just £100 per month, they are able to make a net saving of over £14,000 in interest compared to if they made no repayments. It would also leave them just over £148,000 remaining equity to pass on.
And even by repaying £50 per month, they could make a net saying of over £7,000 versus if they chose not to make repayments – leaving them with more than £131,800 to leave to their estate after 15 years.
Finding the plan that suits your client
Finding a plan that aligns with your client’s current and future affordability is essential, increasing the need for more flexible options that also support clients during the inevitable changes of later life.
If your client opts for a standard lifetime mortgage or an interest-served option, identifying product features such as fixed early repayment charges (ERCs), downsizing protection and ERC exemptions are ways you can ensure your clients are supported throughout retirement, with more options and control over their future finances.
Find out more
If you wish to get in touch or learn more about how we could help your clients significantly reduce their total cost of borrowing, please visit our website or contact us directly. Our adviser support team are on hand to provide the information and support you and your clients need to make informed decisions.
This article is intended for intermediaries only and has not been approved for use with consumers. Back to newsroom