Homeowners have been warned of the risks of being sold equity release products that are inappropriate to their needs.
The news comes a week after the FSA proposed new rules for the sales of mortgage equity release products following doubts about the standard of advice given on the growth sector.
Andy Frankish, director at Mortgage Talk Direct, says the growth in the popularity of equity release schemes has resulted in some borrowers being sold packages that are inappropriate to their needs.
He says” “Although I genuinely believe that equity release schemes are a very useful mortgage product, many borrowers see them as a way of obtaining a loan for a sum far greater than they would normally qualify for. While they are suitable in many circumstances, there are occasions where buyers will be tempted to over-commit themselves.”
“Professional brokers should undertake an affordability calculation, to pre-qualify applicants looking at these schemes. Even if the client cannot physically produce a wage slip or similar, some evidence of income should be requested before they are allowed to proceed.”
“Any good broker ought to explain the significance of the client's monthly commitment, and should produce a statement, in plain English, clarifying the implications of failing to meet their obligations. This should be signed by the client, as an acknowledgement.”