With increasing numbers of clients interested in equity release, more2life, one of the UK’s largest equity release lenders, has launched a guide to understanding equity release lending criteria to help advisers manage client expectations.
Analysis of more2life cases suggest that there are some signs that advisers should look out for when speaking to potential clients as it may make it harder to place the case or result in it being declined all together. As products which are designed to be held over the long-term, the lending criteria around equity release plans are based on ensuring that the asset will increase in value and any issues which might impact on the value or saleability are avoided.
While criteria does typically vary from funder to funder, features such as a large proportion of the property boasting a flat roof, being situated near a busy commercial property or on a flood plain will mean that the case is more likely to be declined. To help advisers manage client expectations, watch out for potential issues and build awareness of underwriting criteria, more2life has identified the following potential barriers to an equity release application being successful:
||As flat roofs need to be regularly replaced, properties which boast a significant amount of flat roof may not be eligible for equity release.
|2||Commercial Property||Properties next to commercial properties may be harder to place with a lender but this varies, a house next to a takeaway will struggle more than one next to a post office.
||Some older properties are made of wood, COB, Laing Easiform etc. which can make them harder to value and place|
|4||Flood Risk||Properties on a flood plain or which have flooded in the past
|5.||Single skin construction||A wall made of a single layer of material – typically bricks
|6.||Ex-local Authority||Typically a privately owned property in former local authority housing
|7.||Clutter||Sufficient clutter within a property makes it harder to ascertain if the property is structurally sound
|8||Asbestos||Asbestos present in the walls or ceiling
|9||Proximity to electricity||Close to electrical substations, powerlines or pylons
|10||Foam under roof||Certain types of foam insulation sprayed onto the underside of the roof may not be accepted by all funders.
Dave Harris, CEO at more2life: “With increasing numbers of people aware of the benefits of equity release, we know that being declined by a lender can be devastating for the client and a real disappointment for the adviser who has worked to help them.
“We don’t expect advisers to be able to tell if a property is on a flood plain or not but if the client mentions that they have been flooded in the past, this should sound alarm bells and they will be aware that the case might be more difficult to place.
“Every funder has slightly different criteria and as more2life work with a variety of different organisations, we are in the fortunate position that we can help the vast majority of our customers but we believe it is important to educate advisers so they can start to manage their clients’ expectations.”