View more on these topics

Act smooths path to equity release

Arranging equity release on leasehold properties is an issue I’ve written about before, but such is its continuing relevance that it’s worth revisiting.

While the content of such leases can be a prob-lem for some providers, their length is often the main impediment.

Product providers have differing criteria for accepting leasehold properties. Usually they re-late to either the remaining term of the leases or a combination of this and the clients’ age.

Sadly we can’t turn back time but we can off-er a helping hand when it comes to lease terms that might render clients ineligible for equity release products.

The Leasehold Reform and Urban Development Act 1993 is worthy of our attention. This piece of legislation has proved to be a boon for many consumers who don’t qualify for loans.

The act is extensive, but of particular importance to both mainstream and equity re-lease advisers is its element that allows leases to be extended and freeholds bought.

For the act to apply, properties originally must have had a lease period of at least 21 years, irrespective of the remaining term.

They must also have been used for residential purposes only. If the property in question is a flat, no more than 10% of the surrounding building can have been used for commercial purposes for the act to apply, thereby excluding most apartments above shops.

If properties qualify under the rules of the act, leaseholders must be allowed to extend their leases by up to 90 years.

This rule should make it possible to smooth the way for equity release schemes, although any extension to the leases will not come for free. So it would be wise for clients to consider having individual valuations carried out for the cost of the lease extensions.

There are many sources of information, one of which is www.leaseholdadvicecentre. co.uk.

This website provides a useful overview of the act and offers services for lease extensions and freehold purchases, plus an explanation of the processes involved.

Recommended

Float may buoy Moneysupermarket brands

Rumours of a possible stock market floatation for Moneysupermarket.com were the talk of the industry last week, with pundits forecasting an even more prominent role for the price comparison website and growth for its broker-facing brands.With its Mortgage 2000 sourcing system, M2 mortgage club, paaleads.com lead generation firm and m2-d&p packager all in line for […]

House prices rose faster in April

Annual house price inflation rose to 11.3% in April from 10.9% in March, statistics from the Department for Communities and Local Government reveal. Between March and April there was a rise of 1.2% in the prices of properties bought compared with a smaller rise of 0.8% over the same period last year. Annual house price […]

Advantage launches sub-prime product range

Advantage has launched a sub-prime product range including two-year fixed rates from 5.79% and has also mades criteria changes.Keith Dearling, managing director at Advantage, says: The sub-prime mortgage market has used the same categories for many years and it can be unpleasant for a client to be labelled heavy adverse etc. Therefore, we have created […]

Unforeseen dangers of weak criteria

I recently attended the Global ABS conference in Barcelona. This year, 4,000 people from all over the world descended on the city to discuss the European securitisation market.

Newsletter

News and expert analysis straight to your inbox

Sign up