One of the main reasons for starting this podcast was to address the question; is equity release a scam?
I hope we address this in most episodes but it’s one of the first questions we ask equity release advisor Trevor Smith.
Huge Disclaimer: The following transcript was generated by a machine. It’s not perfect. It’s definately best to listen to the audio version!
Alex: Hello, and welcome back to the equity release podcast. And this time I’ve got a former professional footballer which I just found out a couple of minutes ago. Trevor Smith, how you doing?
Trevor Smith: Yeah.
Alex: And we were having a lot of the first time we met I gave you a rugby ball.
Trevor Smith: Yeah. (laughing)
Alex: When he found out now what must be a year later?
Trevor Smith: Yeah
Alex: It was. So we met at a sort of mortgage kind of event conference and I was using like a cuz I love rugby. And I was in a hostel. And then I ended up giving out a report to your professional footballer that when we want to talk about equity release, obviously.
Trevor Smith: Yeah.
Alex: And we had a chat before. I’ve run advertising campaigns for our clients and we’ve had a lot of negative kind of comments on them. That’s one thing you kind of picked out. So we want to sort of tackle today. And I think my first kind of question, Trevor would be, is equity release a scam? (laughing) Because that’s what people think.
Trevor Smith: Well, I think people are just generally uneducated about equity release, I think, you know, if you want some financial advice, go and ask him down the pub. That’s how it seems in equity release. You know? And, of course, it’s an economy you know, you look at like the Legal & General and Liverpool Victoria, Aviva, you know, these companies have been going over 150 years, you know, the 10s of thousands of patrons. Can you honestly see that if they would get involved with something that’s a scam?
Alex: I’ve seen that. Well, one of the reasons I’m doing this podcast is because I don’t know all the finer details, but having met people like you. The other people that I’ve interviewed that I’ve met, I just know that they would not be involved in that. But absolutely great points as well, these massive companies. Yeah, they just absolutely wouldn’t. It just wouldn’t.
Trevor Smith: Exactly.
Alex: It doesn’t make sense.
Trevor Smith: The best is the, you know, the British economy, really major employee employers out there, you know.
Alex: Yeah. Absolutely. So why do people think it is?
Trevor Smith: I think it’s just a lack of education. And I do think it’s the fault of these big companies. I don’t think the spending of money, time and, and effort on getting that message across I don’t, I think, as I said, people are misinformed that, you know, they listen to their friends and their family of probable things that happened 20 years ago.
Trevor Smith: You know, it was a different world back then, you know, pre-credit crunch, you know, it was a different world, certainly with equity release, you know, so
Trevor Smith: I think mainly back in the day, it was a different type of equity release is what you called home reversion where you used to, you know, you sold a percentage of your house or the hot or the 100% of the property it would be to divide it would then the value of the house below market value and give you a lump sum and then interest was charged on top of that. Yeah, so, yeah, so, I think that you know, that’s where, you know, people were actually losing their homes at that point for a lump sum mine, but,
Trevor Smith: That’s where the bad press came from. Today. You know, 25 years later, 20 years later. Lifetime mortgage it’s not, it’s not a point 5% of people do home reversions 99.5% you’d like to our mortgages
Trevor Smith: release which is a different type of equity release which basically means that equity release today is a different world it wasn’t an equity release today, you know, one of the main benefits of it is you will always own you’ll always have title to your own properties just like a normal mortgage, you know, just basically you’re all you have title of the property, you’ll always own the property. And if the property goes up your benefit, of course, like a bike if it goes down, you have to take the hit, but you know that it is just like having a normal mortgage, but it’s just called a lifetime mortgage.
Alex: Absolutely. And then if someone still feels sceptical because you mentioned obviously before people were kind of valuing the house low.
Trevor Smith: Yeah.
Alex: What if somewhat, someone’s I can assume someone’s thinking now what’s stopping anyone from doing that now?
Trevor Smith: Well, of course, it’s the independent value is our independence. I mean, we know, we don’t, we don’t appoint about it. The value is the lenders do just like you know that west in and net the nationwide will appoint a value-added to the value for you know for a normal sort of room is no different.
Trevor Smith: Just the lenders have different lengths of legal in general a beaver pulling Victoria those are the sort of lenders in this year you know like equity release lifetime mortgage arena so yeah, they appoint an independent value with the goal to go out and value the property. So, yeah, we know there’s no down values evaluations from like they did in 2020 years ago.
Trevor Smith: Which is a different again, you know,
Alex: So he thought he’s basically much fairer
Trevor Smith: Yeah.
Alex: Whereas before it was
Trevor Smith: Just like done like exactly the same way it was an old mortgage don’t know because there’s a lifetime motion because now we equity release now he can serve you can actually service the interest you can actually make payments repayments you don’t yeah you know you’re not you know you don’t lose control of your property you can actually make payments towards the interest if you know if you wish you know, yeah that’s one of the things.
Alex: I’ve got quite a lot of options now as well then see, it is quite fast. What do you have to make the decisions straight away or can you if you want later on or how does that work?
Trevor Smith: You can make optional payments if you wish. But those optional payments you’re not you know, once you make a payment, you could you know, you can make a regular payment every month to sort of contributing towards paying off the interest. But if at some point in your life and something happens and you don’t you do want to make up him You can stop that payment is no come along and say you stop making payments to your mortgage your lifetime mortgage issue repossession proceedings you remember not you know never ever happened you’ll always have tenure in your property we can do it optional payments you make payments and then and then and then take you to know you can maybe take a holiday or stop playing altogether and just treated like a normal equity release later mortgage.
Trevor Smith: so you have options you know I mean you do you know you can make payments you can you know you can check a lifetime mortgage not make any payments to tell you to yourself really.
Alex: Yeah, nice one. So, when someone’s thinking I’ve seen comments, where some people say are the rates massive it’s ridiculous interest rates and things like that. But all the advisors I’m speaking to are saying that there are really low rates at the minute is that people again comparing things from 20 years ago?
Trevor Smith: I mean, the rich coming down all the time we get we get. What I’ve noticed with releasing lifetime mortgages that lenders are changing the rate every week, the lender will change amazing how closely it works, I guess to the markets. Where’s it? Where’s your over mortgaged? I’ve noticed that you know that every change every, every month, every two, three months, whoever receives the weekly and the rates are coming down on some other one from legal and generally sweet to me like 2.76 or something. I’ll have to check it. Check it.
Trevor Smith: We’re under 3%. I mean, some of you take a five year fix mortgage out with NatWest, now you’re looking at you know, two-point something 2.3. Something like that
Trevor Smith: Rates, you know, Well under 3%.
Trevor Smith: So yeah, I mean, that argument is no longer really, I mean, I think that you know, the really, really competitive. What am I? Well, Alex, you on your previous question that you can actually make lump sum repayments on the equity release as well, you can make up to 10% pay off 10% per annum of your balance without penalty.
Alex: Right, okay.
Trevor Smith: was making payments to the interest you can actually be about lump sums if you wish, you know
Alex: that is nice because there’s a lot of situations where people are kind of gifting deposits to children and they may want to pay their parents back and put the equity back in as well as pay the interest.
Trevor Smith: Yeah.
Alex: Okay, well, can you take me through a couple of people that you’ve helped them don’t obviously name any names, but talk or any kind of situations where you’ve kind of helped people and where these scenarios where equity release because it’s obviously not for everyone, is it? I think every activities advisor says you know, this is really good for some people but not for everyone so if you’ve got a couple of scenarios for us.
Trevor Smith: Yeah, this is what really frustrates me when I get the comments on Facebook, you know, putting it on Facebook and I lost it on there you know, it frustrates me but you know, when I see everyone see a client, I looked at it those people who were trolling me to an appointment and you know, one or two appointments have been on is just unbelievable. I’ve had a client who was terminally ill in the past, with cancer and the affairs You know, he wanted to get his affairs in order. Before anything happened, and you know, the other few credit card debts and a couple of cars financing you know and the one he wanted to take out a loan he couldn’t obviously couldn’t work either working or anything like that. And so the one you wanted to get his affairs in order but also he was a big Elvis fan and you want you wanted to try and get to Memphis you know as you know to visit you know Graceland where Elvis was lived and that was one of his wishes and as well and yeah so I mean you know, we sorted that out and you know and got his all his affairs in order for him it was unable to pay his credit card bills off and pay the car loans off and get himself out to Memphis book you know, you can’t tell me that, that that, you
Alex: One thing I was going to say is when I’ve seen people put you know it can pay for a holiday you know I’ve never in my mind thought of it being that kind of holiday you know where and in fact that’s just huge kind of advice huge.
Trevor Smith: Yeah.
Alex: So what’s the so for his partner then, what’s the what would have happened if they’re not got actually it’s obviously got a lot of debt. They’re not working credit card debts car finance payments that she would have had responsibility for I presume without equity release whereas now that’s all paid off still can live in their own home yeah she doesn’t have to sell
Trevor Smith: What would have happened to her? She’d probably let her go bankrupt.
Trevor Smith: And then probably would have, I guess, for the cows come for the house.
Trevor Smith: You know. Yeah
Alex: Would they What are they? Because you’ve got to talk to them about other options. Is there any other option for them? If they can’t I suppose they’re not they don’t. Because equity release we were obviously they’re not we’re not looking at income. We’re looking at what actually they’ve got property. I can’t I mean, I’m not an advisor to say, but I can’t think of another option.
Trevor Smith: No. In that case, it wasn’t really teaching them 2.5 for the mortgage, certainly to get enough too, you know, to what they needed. Really.
Trevor Smith: That was that was the that was the option, really.
Alex: So that’s fairly unique. What are the kinds of scenarios because then the majority of people take them out? Well, in terms of the question, as you can, is the majority for people using it for home improvements to actually increase the value of the property?
Trevor Smith: People who I mean at one another guy that it was a scenario he would literally fall out. And he had he was retired and he and he had a property worth about 3,000 who lived on his own. You had no brothers, no sisters, no cousins, you know just totally on his own. And he and he and he wanted to borrow 25,000. You know to go on a few holidays to do some woman proves to me how safe it is for him because it was getting a bit run down the property in that. Yeah. And, and he also wanted to go on a cruise and he and he thought and thought about buying a little fishing boat.
Trevor Smith: You know, but his scenario is that he had nobody to leave the house to, you know.
Alex: Yeah, right.
Trevor Smith: I don’t even know. So you know that many things happen to him that will probably be sold in the crown.
Trevor Smith: So you don’t mean why would Why is not a good idea why is not
Alex: That’s a brilliant idea obviously uh why you can’t take it there’s no point in being the richest person in the graveyard and if you’ve got that there to enjoy it absolutely and especially when we if we always never forget that he’s never gonna lose that. I can still live in it.
Trevor Smith: Yeah. You know, to suit his circumstances, you know, he can put some guardrails on the front door. And but you know, again, no matter how safe for him so he can live there, you know, and didn’t want to move. You know, he was quite happy there.
Trevor Smith: It’s perfect.
Alex: Yeah, that’s really two kinds of polar opposite scenarios where this can work. And what are the types of inquiries you are getting any kind of activities? Kind of
Trevor Smith: One of the ones I’ve got, I’ve got, I’ve got a couple of new houses repossessed who if we don’t sort something out a bit careful.
Alex: Are they on interest have they been on an interest-only loan?
Trevor Smith: Interest-only mortgage and it’s coming to the end of the term in a few months from now. And we’re trying to get them an equity release to pay off the mortgage and it’s not it’s proven really difficult this one and to be honest with you I see that if we don’t start here I cannot live in the house. You people see remodel the going downside they’re 30 years and there’s dementia there and in one of the applicants and I worry for that person you know if the, first if you’re gonna, lose that house.
Trevor Smith: Because the lender the mortgage credit interest-only mortgage increment end of each term and they’ve got and they will start repossessing proceedings again. And this guy will not survive.
Trevor Smith: If they moved, and we were having a problem China would get a lender dude to lend it to them. So, you know, that’s, that’s really worrying that one for me it really concerns me. I don’t know how that can be put in that position, you know, the lenders have got a lot of answers to really the outcome there is going to be the moment I haven’t got the answer, because we were struggling to find a lender.
Alex: And is that because of just not quite enough equity in the property or is it the state of the property or what.
Trevor Smith: the property is fine. It’s just near Italia. It’s near a pylon nice
Alex: To the word about being able to sell it. Well, after it’s all
Trevor Smith: Yeah, been a hundred years parlons probably been 30 years and within sort of 50 meters, I think.
Trevor Smith: And the lenders and value are going out and they’re not and again it’s getting back so it’s not looking great man but I’ve spoken to it an equity lease and the way that what the difference would be but I spoke to an equity release homie reversion because they are desperate.
Alex: Yeah so that’s when there is that option yeah.
Trevor Smith: I think one of those companies and look at it you know but we’ll see.
Alex: Okay, what is it’s been a really interesting way to think about like always kind of different scenarios where you are helping people it’s such a shame that people have got, you know you’re getting people like almost attacking you on Facebook when actually if they listen to this, I do hope they do. It’s just the opposite. And like I said at the beginning if you know, having met you I’m a good judge of character. I can’t imagine you would be involved in anything like that. And like you said, All those lenders as well and I hope that case gets get sorted right but it sounds like what you’re doing is you’re helping people in a situation where they’ve got no other choice or you’re actually really it’s a really good option because you know there’s that guy that the money wasn’t the there was no one to inherit that property anyway and he’s enjoying a really nice rapid retirement. I think it’s a great product and I’m really glad we got you on to chat through these travels. So if anyone’s got any questions about equity release is it best to head to your website or when Can someone get in touch with you?
Trevor Smith: You can get me on Facebook. For more advice on Facebook, get me on my website. You can do the usual ways really.
Alex: Yeah. I’ll put some links on the show notes here. If anyone’s got a question for you. But, Trevor, thank you so much, mate.
Trevor Smith: It’s been great. Thank you.
Alex: No worries.
Trevor Smith: Yeah, really.
Alex: Speak to you soon.
Trevor Smith: Thank you. Bye.