WWe describe our company as being made up of brokers who specialise in equity release indeed it is extremely unusual for us to become involved in anything else. We operate an introducer scheme for advisers who do not wish to get involved in this area.
Its not unusual when I am speaking to other advisers for the first time to get the response: We never recommend equity release to our clients.
When I ask them why this is, I rarely get a logical answer.
So what has prompted this letter? I have recently been dealing with a 64 year old unmarried woman with no children. Apart from her 94 year old father she has no other living relative apart from her brother who lives next door.
In March last year the client wished to raise money to pay off an existing mortgage, some debts and allow her to carry out some home improvements. At the time, she was contemplating equity release. Two weeks ago she contacted us to request that we visit her to discuss equity release and the following story unfolded.
Due to reading adverse publicity in the press, her brother had persuaded her that equity release was a poor choice and that she should approach a mortgage broker for advice. In June 2006, the broker suggested that she applied for a mortgage of 35,000 over 22 years plus 3,025 to cover the following fees 750 application fee including valuation, a 25 insurance fee and a 2,250 broker fee, making a total of 38,025.
As part of our fact-finding process when arranging equity release, we always produce an income and expenditure account. On arriving at her home for the first time I found that she had already produced such an account showing that she had an income of 680.81 per month and was spending 750.59 per month on basics including her mortgage. And this is without any allowance for food. Indeed, she had written at the bottom of the sheet: Food = 0. She confided that she had made up the shortfall and paid for her weekly grocery bills using a credit card.
Since she has made the decision to apply for equity release, her brother is no longer speaking to her and has been written out of her will.
We are now in the situation of applying for equity release for her for a sum well in excess of the originally requested 35,000 to cover, among other items, 2,661 redemption penalties, a 200 repayment fee and the credit card bill which also includes the valuation fee for the equity release deal this at a higher rate of interest than the one that was available a year ago.
For some strange reason the client, who lives in a modest house in a pleasant seaside town on The Wirral does not wish to downsize and move to a small terraced house in Birkenhead.
I dont think I need to make any further comment regarding the above case other than to say that the combination of adverse press publicity and the misunderstanding of equity release by some advisers in the financial services industry is preventing some elderly people from leading the lives they deserve.
It is not a product that should be taken out as a last resort, nor is it a way of paying for luxuries which previously people only dreamed of. The truth probably lies somewhere between the two.
If you dont feel comfortable recommending equity release, pass your clients on to a company that has expertise in this area and you can be safe in the knowledge that you are doing the best for them.
Director, The Way Ahead