Mortgages  

What do clients need to know about suitability and risks?

This article is part of
Guide to later life mortgages

To help assess suitability, equity release customers are encouraged to involve other members of their family.

Recent research by more2life shows 80 per cent of advisers believe family members should be involved in the equity release process.

Steve Paterson, director of Teeside Money, sums up some of the pros and cons of being an older mortgage client. These can provide a starting point for any adviser/client discussions.

Pros

  • The owner can remain in the property for life or on moving into long-term care.
  • No regular payments are required, although clients can opt to pay the interest and some of the capital without penalty on many products.
  • Plans guarantee that if the loan exceeds the value of the property, the lender will not require the excess to be repaid (lifetime mortgages).
  • The cash raised is free of tax and can be used for any purpose.
  • Most schemes are portable.

Cons

  • The house is mortgaged again and this will reduce the value of the estate.
  • The debt can roll up quickly.
  • There are charges involved and some people are reluctant to take out another mortgage.
  • Means tested benefits can be affected.
  • Home reversion schemes involve the customer giving away all or part ownership of the home.

Protection conversation

Advisers with older mortgage clients may also want to strike up the protection conversation with them.

According to Emma Walker, chief marketing officer at Lifesearch: “In 2018, we advised over four times the number of clients from the age demographic 60 and over looking for protection to cover their mortgage needs than in 2017. 

“We expect to see the number increase again 2019.”

As Rob Harvey, head of protection advice at Drewberry, observes, people are requiring mortgage protection increasingly into later life.

“The most obvious mortgage protection is life insurance, which we're seeing individuals need to increasingly advanced ages as their mortgages stretch for longer,” he explains. 

“The cost of life insurance rises as you get older and the longer you need it for, but even then, it's not as expensive as most people think.”

eleanor.duncan@ft.com