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Episodes For The Public Equity Release Types Of Equity Release

Equity Release Interest Only Mortgage Expiring

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 to the equity release podcast. And today I’m with Mark Thompson from CS Retirement Solutions who just surprised me off air by saying that majority of inquiries that you’re getting in business, you’re doing it on people that don’t realize they’re on an interest only mortgage sort of burying their head in the sand thinking they’re paying off their mortgage but no, I just couldn’t believe people didn’t know they were on interest payment.

Mark: I know. It’s amazing, isn’t it? That about 20% of the overall equity lease market in the country. And there are over a million interest only mortgages ongoing as we speak in 2020. But the staggering figures is 126,000 of those are going to be coming to an end.

Alex: Yeah.

Mark: This year in 2020. So you’ve got somebody there has an interest in him or he’s been paying the interest only in their mortgage, and the bank has turned around to them and say or the building society. Okay, your mortgage comes to an end in June. So we want you to pay back the amount that you owe us. So customers are left thinking, well, what am I going to do? Because my situation now in retirement is a lot different or coming up to retirement a lot different to was when I was earning a lot more 15 or 20 years ago. So a lot of people are faced with actually losing their homes.

Alex: Yeah.

Mark: The banks are quite brutal, just say, we want the money to be paid back please. So where do you go?

Alex: Yeah, exactly. So it kind of makes sense that I suppose it depends on everyone’s situation is gonna be different. And so they I suppose that actually does not really help every single person there. They need the right amount of equity available. And so what do I do then? If I’m kind of I’ve just realized today that I’ve got an interest only, the banker chasing me, what’s the first thing I should do?

Mark: Well, a lot of people approach initially seeing if they can get a mainstream mortgage if you like it.

Alex: Yeah.

Mark: And all mortgages, you know, is the one available and how much does it cost?

Alex: Yeah.

Mark: The thing is, if you’ve been paying an interest only mortgage, you’re paying less payments per month.

Alex: Yeah.

Mark: So quite often the face with the fact that if they’re looking at then a capital interest where they’re paying back some of the capital, that then becomes prohibitive in terms of the amount they’re gonna have to pay back or what, you know, what vehicles they’ve got in place to pay back the money in any event. So a lot of the inquiries come from people that are just generally looking out there in desperation, lots of cases it’s people tend to leave things to the last minute in the mortgage world. 

Alex: Yeah. 

Mark: It’s amazing that they don’t always plan ahead. 

Alex: Yeah.

Mark: You know, I’ve had a letter from the bank and in two months time I’m going to be homeless, what can you do for me? And you made a valid point though that equity release it’s not it’s not for everybody and it isn’t everybody’s situation is different. So we don’t just go into equity release is the answer. 

Alex: Yeah. 

Mark: But it’s one of several possible solutions, one of which you sign for a home which a lot of people don’t do a mainstream mortgage, but they have to service that payment then. So if you’re taking a normal mortgage, you’ve heard of possibly other retirement interest only mortgages where you can carry it, take another interest only mortgage, but based on your retirement income, but you’ve got to service that in interest. And so you’ve got to be earning enough and have enough pension enough income to make sure that can be paid back. 

Alex: Yeah, absolutely. 

Mark: So give me just an example. 

Alex: Yeah. 

Mark: The easiest things a couple came to me a few weeks ago, and they’d had a letter from the bank, you know, they’ve been in their community for 20 years. And the bank was saying we want you to pay back the money. Now they were both retired but both had small part time jobs to maintain the lifestyle. 

Alex: Yeah. 

Mark: And they were fairly desperate because this has been stressing them out. They were faced with selling the home that they didn’t want to do, guess they could downsize, boom, they spent 20 years in their home and invested in it, it was lovely. It was their palace. And all of a sudden they’re faced with having to move out. And so, we go on to talk about equity release solutions. And when they understood the concept of it and how easy it was, and the fact that they could take an interest only equity release lifetime mortgage, which meant they could pay back the interest if they wanted or not. They were so grateful and happy to be able to move into that position. So they just took an amount of pay off their existing mortgage. They then had a lifetime mortgage, which didn’t then have to be repaid until either one of them died, the last one of them died or went into long term care, which is the beauty of the equity release product. So they were never going to have to pay it back until the property was fully vacated. And they had the potential of paying back the interest if they wanted or not. So they can service interest or just let the interest build up. And their decision was, well, we can take things a little bit easier because these jobs that they’ve been doing to keep the lifestyle going all of a sudden meant that they weren’t working, it wasn’t end of the world because they wanted to pay back some interest on the mortgage, they could but they didn’t necessarily have to so fantastic solution for those people, you know, and try their alternative was, you could sell a house because there was no other mortgage available to them based on their income. Well, that would have got them out of that situation. 

Alex: Okay. So what would happen then if one of them did pass away to the other person, if they’re in that equity release? 

Mark: That’s the question. Nothing per say in terms of the surviving partner is losing the house until their death or they go into long term care? 

Alex: Right. Okay. 

Mark: So that’s the key thing that you never lose your home on a lifetime mortgage.

Alex: Yeah. 

Mark: And so they basically would live there until they no longer have a need for it. 

Alex: Yeah, absolutely. 

Mark: So it’s that straightforward.

Alex: And then what happens when they’re both gone property goes up for what complications are there in the terms.

Mark: There aren’t really, it’s like any other mortgage, the lifetime mortgage or equity release with a lifetime mortgage is just a mortgage. 

Alex: Yeah. 

Mark: It is, as it says on the tin, it’s a mortgage for life. And it’s fixed for life as well. So we have the payment, the payments are fixed. And as with any mortgage, if the property sold the mortgage plus the interest that accrued, it’s been paid off. 

Alex: Yeah. 

Mark: So it’s whatever is outstanding at that time. 

Alex: Yeah. 

Mark: Isn’t paid off any balance obviously goes to the state. 

Alex: Yeah. 

Mark: The benefactors children, whatever. So if the mortgage itself is just paid off, this concept of losing the house is something that people struggle with. 

Alex: Yeah. 

Mark: The old equity lease as was many years ago that wasn’t fully regulated. 

Alex: Yeah. 

Mark: And there were these things called home reversion plans where people actually sold their property. So companies where we’re buying, we’re buying the property. 

Alex: Yeah. 

Mark: So the property wasn’t mine, all of a sudden, I just sold it to a company. They let me stay in it, but I didn’t own it.

Alex: Yeah. 

Mark: Which isn’t the same as having the mortgage. Home reversion plans now make up a very, very small percentage of the overall equity release mark up. I think it’s something like .5% 

Alex: Yeah. 

Mark: The overall market in total. So just like a normal mortgage, it has to be paid with the interest if somebody is paid the interest often serviced interest as we say. So if you bought 100,000 pounds and you service the interest, then you owe the hundred thousand pounds. 

Alex: Yeah.

Mark: You know if you’ve taken 100,000 and you’ve let the interest just compound that build up an interest on interest, then you just pay back what is owed at the time. So it was people’s decisions or what to do.

Alex: And then what the factors the lenders look at we’re not kind of looking at income and things like that if we’re if we’re so if you are kind of retired, you’ve got an interest only coming up what they’re looking at your age and what’s gonna left in the properties. 

Mark: Yeah. Generally the equity is your property generally you’ve got to be over 55. Property has to be of a certain value lenders are all slightly different. But usually a property was worth at least 70,000 pounds as a minimum. And a property that’s going to be saleable. So obviously if they grant you a mortgage for life, they will know when they get the property back that it can be sold. But generally there’s no income, so I will not be interested in income. It’s based on a client’s age, and the value of the property, and more importantly, how long they expect that client to live. So the amount they’ll lend depends on the life expectancy. So a bizarre label, if somebody is ill and hasn’t got a great life expectancy, they can borrow more money because there’s less risk to the lender in terms of the amount of time that the mortgage will be outstanding.

Alex: And what they send like surveyors around to the properties and work out the value house price. 

Mark: Yeah. It’s still like it will still be severe go around in the main to evaluate it, you know, and to make sure it’s saleable. 

ALex: Yeah.

Mark: That’s the main thing. 

Alex: Yeah. 

Mark: Like any other mortgages, 

Alex: Yeah. 

Mark: If they thought, well, we’re going to invest money in this property. This is our security. 

Alex: Yeah. 

Mark: Is it good security? Is it something that we think we would sell on the market. 

Alex: Okay. Excellent. Anything else I should be aware of? Or any other options are there? If I’m in that situation where I’ve got that letter? Or I suppose the broad question.

Mark: What well, yeah, it is. I mean, obviously, you should first and foremost speak to your bank or your building site to establish the position with them and whether or not they can help you in any shape or form. So that’s the first port of call. It is really, what is your exact position? There’s no point, you know, getting where you need to understand. seek legal advice. As well, you know, people always seem to be a bit slow in seeking the proper advice. But then speaking to people like us that, you know, we’re there to sort of guide them and direct them to the right place. You know, and obviously, with this work where we could, and I would say the point it’s not just right, this is equity release, we’ve got a look at all the options and identify the best option for the client at the time. 

Alex: Okay. 

Mark: But like anything if they don’t want to move now, then what are their options, you know?

Alex: Excellent. So it’s kind of like don’t bury your head in the sand. It might not be the end of the world you may not have to sell. 

Mark: Um, it depends on most definitely and look at it earlier.

Alex: Yeah.

Mark: Don’t leave it to the last minute.

Alex: Yeah.

Mark: You know. I used to say many years ago talking to clients that so are my bankers gray, right? Well, they’re all moneylenders. 

Alex: Yeah.

Mark: That’s what they do. You know, they’re lending you money and they’re lending you money at a rate. What you want to do is get the best rate you can. 

Alex: Yeah.

Mark: But if it comes to a point when you’re not paying them back, then they take on a different persona in that sense. 

Alex: Yeah. 

Mark: Repossessions if you’re not paying your loan back, they’re going to repossess It doesn’t matter how nice they are. Like that’s what they’re in business for.

Alex: How often should I review it if I say I’ve taken it out? The lifetime mortgage? Can I review it? Or is it set in stone? You talked about a bit of flexibility?

Mark: Yeah, that’s a really good question. Interestingly, about 5% of the market are people actually either taking more from an equity release notes, or actually totally swapping one architraves product for another. In fact, you know, the old equity release as well as with the higher interest rates, the higher interest rates where the interest if you didn’t pay it back was compounding very quickly, and people could see the depth going up. There were still those deals around and that and that’s what gives the industry all the money, a bit of a bad name, but with some of the all time low interest rates now, there’ll be a lot of people out there that should be thinking, well, I’ve got an equity release product. The only alternative is perhaps another equity release product, but the new one will be so much cheaper than the original let’s say that forms about 5% of the market. So that’s quite a heavy number. Really? 

Alex: Yeah, absolutely. We have to come back to that case study earlier whether that couple was AC grands that they kind of owed on interest only what were their payments compared to what they were paying before was? 

Mark: That’s a good question. Not too dissimilar if I recall probably slightly cheaper. Again, the rates with an equity lease vary depending on how much you’re borrowing, how much borrowing against the equity, how old you are. So the rates again, the rates are different for everybody. 

Alex: Yeah.

Mark: I think what does surprise people is how cheap the rates are. Bearing in mind the historic Oh, yeah, yes, eights, nines 10s 12%. So I mean, I’m old enough to remember them highly. 

AlexL Yeah.

Mark: Unfortunately you know, there is a fixed rate mortgage interest, you know, for life at 2.5%. 

Alex: Yeah. 

Mark: Which, where can you go and borrow money and fix it for life at that rate? I’m not saying every case is like, 

AlexL Yeah.

Mark:  But obviously they vary, but there are some extremely cheap, right.

Alex: A lot of people search online for an equity release calculator, but it feels like there’s too many factors at play to have a form or a calculator on the website, that’s going to give you the best solution.

Mark: Well, yeah, I mean, obviously, as a mortgage professional, I don’t advise anybody doing it online. Yeah, it was, I mean, you know, it’s amazing that there’s so much online but unless you’ve got a full knowledge of the old saying is garbage in, garbage out. If you put the wrong information in, and you’re gonna get the wrong information out. So as with just the general rule of mill markers I get, I get so many people coming to me saying, well, I’ve got an agreement in principle, and I’ve got it online and then you look at it their situation you think, but you’ve neglected to put in this or the other and actually the worksheet that that way, so before you know it, they can follow 40,000 more than they thought or 50,000 less than this. Yeah. So, and yet, it’s always good to, I like my clients to have knowledge and knowledge gives them the confidence to proceed with it. When I’m first dealing with anybody I’m at, you know, I want them to understand what it’s about, understand the concept. So it’s an educational thing, really getting to really understand the point and they feel more comfortable with it, you know, quite a frightening thing to do and quite foreboding, especially as people are getting older. Having said that, a lot of the older clients are a lot more savvy than some of the younger clients are gonna be very careful. 

Alex: Yeah.

Mark: I’ve got some elderly clients that will run around the block on finance. 

Alex: Yeah.

Mark: Very, very savvy, which is good. But I think anything that educates them about what they’re doing and you do find clients do do that anyway, I speak to people who have been looking at it for a while. It’s not unusual to say to myself, I’ve been looking at this for a year now. 

Alex: Yeah. 

Mark: And thinking about it. But what I can explain in 10 minutes or 15 minutes.

Alex: Yeah.

Mark: You know, overcome what they can take, and if they’ve got quite understand or the real end of the stick with something, so, so

Alex: Yeah.

Mark: I like people to have that education on it. But sometimes, a little knowledge in doing yourself.

AlexL Yeah. 

Mark: And then you’re only looking at maybe one provider and as it’s at all different. So I wouldn’t even know until I go on a system and look at the thousands of products that there are, isn’t it which is going to be the right one for the customer? Right, right. Right. So

Alex: I think I’ve got one last question. 

Mark: Yeah. 

Alex: I know he says kind of plan and not leave it to the last minute but someone’s listening now. And they have how long will this process take if we had a meeting with you, we arranged it. you were available tomorrow. How long will I know that there’s something that can be done. I don’t have to sell if I don’t want to.

Mark: And we’ll, two questions. The first one, how long does the process take? I think the average equity release time scale is about five weeks. That’s the average. 

Alex: Yeah.

Mark: So you can have some that take quite a lot longer than that. 

Alex: Yeah.

Mark: Sometimes it depends on the income all sorts of things come up with regarding the property our clients where they’ve looked at the property and said, Actually, we have to lend you the money, but the property isn’t quite where we want it to be. So we want you to do this repair, do that repair, make that roof good.

Alex: Okay.

Mark: Yeah. So that can contract something on here. I’ve literally known of clients get money released when they’re looking to buy a house. Awesome, because, again, people don’t understand they can take it on the property that they’re going to buy in the transport. Leave politics with you guys. They can have an offer out within less than a week. So again, it’s like a normal mortgage. I have some offers come out in a day and some 

Alex: Yeah.

Mark: But yeah, it is, it is a much quicker process. And generally, I would say about the industry average is about five weeks. 

Alex: Yeah. Okay. And then if I’m, if I’m panicking and thinking I really left this at the last minute, will the banks consider that I’m looking at it? Would they ever delay if they say we’re gonna, we’re gonna go to pay this in too late?

Mark: That’s a really good question. I mean, again, in my lifetime of advising people, yes, you would all banks have got a duty of care to the client. 

Alex: Yeah. 

Mark: And they’ve got to be seen to be doing the right thing. And if they can see that you’re doing something, if you’ve got the right bank and the right person on the end of the failure, then there’s no reason why they shouldn’t give you more time. 

Alex: Yeah.

Mark: To sort something out. And again, that’s why I would always encourage speaking to the bank, and keeping a good dialogue with them. So yeah, that’s a really good, really good question. But yeah, you would keep in touch. And you would hope the bank would give you time. I mean, it’s not gonna be looked up very nicely in court. If, yeah, you know, some elderly couple has told me that I moved out of the home on the basis that they’ve not given them time to actually resolve the situation. Say, actually, this is when we’re relevant, can be can be sorted very quickly.

Alex: Fantastic. So if I’ve not asked any questions, I’m thinking of an okay to drop you an email or how’s the best to kind of cover it off if someone listening has got a question about

Mark: Well, give my phone number if they want to know. 

Alex: Yeah, absolutely.

Mark: 07789941700 is the mobile and mark@csmortgage.solutions.co.uk is the email address. I mean, obviously they can go to the CS Retirement Solutions website and see the team there. There’s some great information on there. They could probably even get a picture of me too. So all I am but they can get information from there as well. So I would send them down at them to go to the website or if not to contact me directly.

Alex: Fantastic. Thank you very much. Thank you Cheers.

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Episodes For Advisors Episodes For The Public Equity Release

Why do Equity Release Advisors, Mortgage Brokers and IFA’s need to work together more?

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 to the equity release podcast. My name is Alex Curtis and I am joined by Mr Stuart Powell today. Stuart, how are you doing?

Stuart Powell: Okay. 

Alex: I’m very well, thank you. So I know you quite well, but I’m guessing the people listening in may never have heard of you before. So can you give us a bit of a background about who you and are what you do?

Stuart Powell: Yeah, sure, no problem. So I’ve been helping clients buy mortgages for go on 17 years now. Most of that for the high street bank. But three years ago, I started a mortgage company. Had a few clients talking about equity release, I’ve done my qualification. So I thought, okay, I’m going to start advising and learn a lot very quickly. Then, over the last three years, the business has morphed into a predominantly equity release business A because I love helping people with late-life lending issues. And B because, yeah, it’s the future. It’s booming. And I want to be part of that. So yeah, that’s a little bit background there.

Alex: Excellent. So, obviously, the main reason for this podcast is there’s a lot of kinds of myths and kind of issues around what happened before what’s happening now. So we want to tackle that but specifically, we were talking off about situations were actually an equity release advisor, mortgage brokers and IFA could really do with working together. Can you talk me through that kind of situation you were talking about earlier, where someone I think someone was, wasn’t right for equity release, but they could there is a solution.

Stuart Powell: Yeah, absolutely. I think mortgage advisors and I’ve been guilty of this and kind of become siloed as to equity release advisors. We’ve become experts in our chosen field. And if we can’t help the client, it’s not necessarily the best practice to work with people who can refer, you can refer the client too to help in a different way. And I’ll give a quick example of this equity release, lenders will lend up to a maximum amount of about 55% of the loan to value in the property. So, putting that in simple terms and £100,000 property that whenever I go and buy a property equity release lender would lend up to around £55,000, but that’s if the client is 80 and above, equity release starts from age 55 if not £100,000 house that only lends you about 25 to 30,000. That becomes a problem for an equity release advisor. So if you’ve got a 60-year-old client who wants to borrow, say 40% of the value of the property upwards, there is a lender out there that would do it. My concern is that equity release advisor simply says to the client, no can’t do it, I’m afraid not. However, if that equity release advisor is working closely with a mortgage advisor, or is able as we are to give mortgage advice as well. There is now a raft of lenders who will do an interest-only mortgage for an older person who will do a repayment mortgage for an older person, or there are specific products, retirement interest-only mortgages that would be right for that person. So given the example, I’ve said, if you had £100,000 property and a £55,000 mortgage, there are the whole sea of lenders who would consider lending to that person. And I’m just concerned that client when they get to see an active release advisor, isn’t necessarily getting the full holistic advice they need and given the opportunity to take a mortgage instead of activities.

Alex: Yeah, okay. Interesting. So, if I put my shoes in, let’s say my mom was looking at equity release and she maybe her first thought might be about money aspect to an IFA, but what advice would you give someone who is looking then, do they ask the activities of either IFA, like who they’re working with or how limiting my options are? What’s the best approach do you think if you are lookout? 

Stuart Powell: Yeah, you know, that’s a great question and I really don’t think that’s a question that the market, customers, and clients are asking because they go to an IFA assuming that they can help with all their financial needs. And it is brilliant in many respects. Equity release advisors are experts in their field and mortgage advisors are very capable people. But if those three groups can work together to help all the client’s needs, then we’re actually providing a great service for every client. In your mom’s example, if she went to an IFA, they may well be an equity release advisor if they are great. Some IFA’s remember old equity release, and I’ve had the experience where they’ve told clients don’t go near it because it’s not a good concept and, you know, compound interest is an awful thing, etc, without really understanding the changes that have happened. So, yeah, I’m a huge advocate on IFA’s, either working with an activities broker or working with a mortgage broker or both and vice versa because for sure we can help our clients with all those needs and help each other’s businesses as well.

Alex: Okay, so it could it can get a little bit confusing then if I’m sort of in the market for of actually knowing that we really obviously want to get sit down with these people. It could be a crowded room, we’d like all three of them in and so I know you do mortgage advice, and equity release as well. But I’m also kind of thinking if someone’s listening now and they’re sort of partway down the road with someone. How do they know they’re getting the full picture? What should they be asking an IFA is it. I know, there’s obviously the equity release council. Should they be asking are they members of that? Yeah. Are there any questions that we could ask?

Stuart Powell: Yeah, it’s a good question. And I mean, if they’re seeing an IFA for mortgage advice and it is the IFA mortgage and equity release qualified, that would be the first question that I asked. I mean, if we’re talking about ensuring that the advisor is experienced and gives great service, then I would also be pointing clients in the direction of vouchfor.co.uk. And I’mbiased.co.uk because that’s the main place where advisors previous clients review the advice, and that’s great. If the client had good advice. My only question would be how does the client know that they received full advice? If you go to an equity release broker, they will give you equity release advice. But could a mortgage have been more suited to their circumstances than an equity release product? So there’s definitely a gap in the market. I know that the stock gap in the market it’s a failure of the market currently to link together. I know, our group are looking to link mortgages and equity release advisors together so that less experienced and the more experienced advisors are helping each other. I don’t know if that is going to have a branch where mortgage advisors work with equity release advisors, and I think perhaps we as advisors need to work together to close those gaps.

Alex: Yeah, no, absolutely. Absolutely. So have you got a kind of like a case and as such, where someone has been told there’s nothing they can do, but then you found something for them. We got like a scenario you could walk us through.

Stuart Powell: Okay. Yeah, that’s a really good question again. I’ve prepared a good example actually, because this happened a couple of weeks ago with a client who came to me with a £275,000 property and had £108,000 outstanding on a Halifax interest-only mortgage, with only three years left to run, and no repayment vehicle in place. 67-year-old couple. So in three years time, the banks can ask for £108,000 back and with no prospect of doing anything other than selling the property or taking an equity release. Unfortunately, as he is 67 as his wife, there’s a limit to how much they can release. Using activities around 33% of the property value, which didn’t get them enough, so 275,000 33% to that would get the £90,750. So if you remember the 100,800 was the mortgage the are around 18,000 short of where they need to be. And you can’t just directly release for some of them out of your mortgage, it has to be the whole amount. However, equity release wasn’t the right option I go decline and say nope, sorry, can’t help I say right. Okay, let’s look at other options. Well, they are on standard variable rate with Halifax and paying £398 a month. And I was able to negotiate with Halifax a new deal one and a half percent and they were paying £135 a month instead of 398. Going on to that deal, they say £263 a month. If you multiply that by the number of months left 36 months, I feel like Rachel Riley at the moment so and that calculates to £9,500. So if they carry on paying what they have got used to paying on their mortgage, they will have 9,500 of the shortfall gone in three years. So the shortfall is £17,000. They’re paying back 9,500 of it. So there’s only a £7,750 shortfall in three years time. In three years time they will be three years older and three years time, in theory, their property value will have increased that stage it’s far likelier that we could find them an equity release deal that would enable them to rate mortgage the balance that they have left, which would be about 99,000 if they had carried on overpaying. So I guess it’s not a precise are it can’t be because we don’t know what’s happening to interest rates. We don’t know what’s happening to property prices, but from going from a position of despair, where they thought their house may be repossessed, we’ve thought outside the box and created a potential solution for them. And I think that’s something we need to do more of as an industry.

Alex: Absolutely. And we’re gonna do another episode at some point on calculate online calculators and things like that. There isn’t a calculator that could have come up with that solution because you’ve got to think about all those different factors. But that’s incredible. This is why I love working in the industry of just hearing how you guys can step in and just what you did with the payments is incredible. So thank you for that. That’s brilliant. There are a lot of mortgage brokers thinking in this way or not how common I guess it is that?

Stuart Powell: We’re not yet common enough, I think, I know mortgage advisors are incredibly busy people and, really taken the time to work on and then grow their business and there are some fantastic mortgage advisors out there. But what’s that George Bush phrase? I don’t know what I don’t know, because I don’t know what it is. Yeah, you know, that’s why my mission in life is to educate clients, but it’s also to educate fellow mortgage brokers and activities brokers into other possible opportunities for their business and certainly their clients. So a lot of the LinkedIn stuff that I do is did you know that you could help clients in this way you could help clients in that way. And just last week, someone responded to one of my LinkedIn posts an IFA, we went for a coffee and I just started talking to him about how modern equity release has improved. And, and he had the old fashioned view of equity release, you know, high-interest rates, not very well regulated and flexible things like that. And I updated him with how it has changed. And literally yesterday he and I went to see one of his clients, who was stuck on a 7.24% equity release rate. Only £60,000 outstanding on their active lease. I was able to source a 2.9% rate for the 60,000. Just putting that into real terms, their monthly payment was £362. And we can do it for £145. So that saving of £2,600 a year and over 10 year period, which you know, looking at their ages that is realistic for them to live for at least that that will save £26,000 over the next 10 years. So the IFA was shocked and delighted for his climb. 

Alex: Oh, I mean that would be, that’s incredible. It gives me another reason why we definitely need to continue doing this podcast because that is incredible. So if someone has taken out equity release before that’s not kind of set in stone then we could be reviewing these on a regular basis or what regular basis reviewing them if you think you’re hard done by again.

Stuart Powell: Yeah, no, absolutely. I think there is a statistic that does the rounds that 94% of equity release clients have never reviewed their equity release, which is a shocking statistic. And in my experience is because they do not know that they can. And part of my work is spreading the message. Mortgage brokers out there will realize that I think the people whose standard variable rates, usually about 35-40%, but the equivalent of standard variable rate for mortgages is I’ve been on my equity release rate since I took it out. So the first thing we look at when we are reviewing someone’s existing activities, right is what is the early repayment charge. And the early repayment charge for the clients I just mentioned is zero because they took it out 10 years ago. So we will check first of all, what their ERC is. And when that runs out, if it does run out, or if it reduces, and we’ll do some maths that says, actually, this is how much we could save you. And even if you’ve got an early repayment charge, this is how long will take before you’re saving on your new rate. Now ways how much your early repayment charges. So that’s what I would say, I would say, over the last two to three years, interest rates have really gone through the floor with equity release. So if anyone has a rate of that which they’ve had for more than three years, review it. And the thing is us, as a group of equity release, brokers will do that for free for the client. So free review. You know, I would say, probably for every three reviews I do, to the advice will be actually no, it doesn’t make sense to do. It might make sense in three years when your early repayment charge reduces might make sense in five years, but at the moment, actually, it doesn’t make sense. Some of those reviews will be actually it will take you six months for paying you. Some will be actually in three years time. You will have saved more money than it’s going to cost you to do this. Yeah. But yeah I think we need to have those conversations and individualize them for each client to show them what is right for them.

Alex: So it sounds like an absolute no brainer, especially if you’ve taken something out before. Like you say that you know, even if one in three people could be on something better, then and it doesn’t cost anything to check, then it just feels to me than sitting down with someone, and coming back to the kind of the overall topic, make sure you’re speaking to someone that understands modern equity release mortgages, all the kind of later life lending options.

Stuart Powell: One thing I don’t understand is why equity release advisors don’t review their own clients and that’s a concept for the last year or so that I’ve been trying to get my head around. And I had a case come to me last week and it kind of, I kind of understood a little bit more and that was an IFA from Paul came to me and said, I’ve got a client whom I did some equity release for five years ago. And she wants to borrow some more money, but the lender won’t let her do it until she’s had advice. I can’t give advice, because I used to do mortgages, then I did activities now I’m just investments and pensions. So I don’t have the license anymore. So there may well be advisors out there with a bank of clients that they’ve advised in the past, that they’ve never gone back because they no longer are qualified to give the advice. So So that might be resonating with some of your podcast listeners.

Alex: No, absolutely. Absolutely. Um, so I feel like we’ve covered loads, but I also feel like I maybe like George Bush. I don’t know what I don’t know. Probably not asking the right question. Well, we definitely going to have you back on because I know you’re very humble about this. But basically the industry of coming to you and asking for your advice on things. There’s obviously a big bank, another big organization, wanting to sit down with you. So I’m sure you’re going to feature again. And then I don’t want to make this podcast a sales pitch. However, I’m sure people may want you. Are you happy if people were to ask you a question on anything if I’ve not been able to clarify it?

Stuart Powell: Yeah, absolutely. I think the thing is, I have a lot of conversations via email, phone and LinkedIn with people who are asking different questions and yeah, you know, you’re absolutely right. My aim is to get more people having more conversations with moreover 55 to get clients in the right position. And yeah, that rising tide, lifts all ships, whatever that other phrase is coming out of cliches today, that really resonates with me. Because if we’re all talking to more people about this, we’re helping more clients and we’re all growing our businesses. And you know, to don’t have to be mutually exclusive. They work really nicely together.

Alex: Absolutely fantastic. What we’ll do is if I can, is your email address easy to spell, or do I need to put the link on the website?

Stuart Powell: Yeah, put the link because I made the mistake of having a long email address.

Alex: Absolutely. So we’ll put that on there. Thank you so much. Stuart. There is again like we said, we’re scratching the surface. So many other topics I want to talk to you about. We will arrange to record more episodes as time goes on. But thank you so much for sharing that. I think that kind of for me. The one key message is to make sure you’re getting kind of full advice. on all of your options, and a no might not always be a No, it’s just a no to one product or one thing. So again, if I go back and think about if anyone asked me I’d say just Are you talking about you’re talking to an IFA, they are amazing, however, do they know about modern equity release and the mortgage options as well. So yeah, thanks very much.

Stuart’s website: https://www.oceanmortgagesplymouth.co.uk/

Categories
Episodes For The Public Equity Release

Is Equity Release A Scam?

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!

Transcription

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.

Alex: Yep.

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

Alex: Yeah.

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,

Alex: Yeah.

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

Alex: Yeah.

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.

Alex: Yeah

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.

Alex: Yeah

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.

Alex: Okay

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.

Alex: Yeah.

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

Alex: Yeah.

Trevor Smith: Rates, you know, Well under 3%.

Alex: Yeah.

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.

Alex: Yeah.

Trevor Smith: And then probably would have, I guess, for the cows come for the house.

Alex: Yeah.

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.

Alex: Yeah.

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.

Alex: Yeah.

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.

Alex: Yeah.

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.

Alex: Yeah.

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.

Alex: Yeah.

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.

Alex: Yeah.

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.

Alex: Right

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.