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Equity release
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CASE STUDY 1 equally appropriate and the best for the client. informed choice. If the process has been
Mr & Mrs Evans, Gerald and Hannah, aged 72 This essentially is the adviser’s job; it is not about condaaaucted properly to this point the clients
and 70 respectively are looking for advice. simply producing a number of different KFIs for will follow your recommendation. I will cover
They feel they have enough income from their the client to choose from. the way to present your advice and get the
pensions, etc but do not have enough funds in Armed with the adviser’s recommend-ation(s) business in the next and final part of these ‘Back
savings or investments to fully meet the cost of the client now has the opportunity to make an to Basics’ articles.
a much-wanted new conservatory. They have
discussed the idea of equity release within their
family and have now approached the adviser to
look at the options for releasing capital tied up
in the value of their home worth £250,000.
Their initial need is to raise £25,000 to help
cover the cost of the new conservatory and to
clear a small mortgage still left on their home.
They are very keen to avoid any sort of
borrowing and feel that the recent increases in
house prices are not sustainable in the long
term and are worried house prices may fall in
the short to medium term.
Both Mr & Mrs Evans feel that they could
live to a good age as they both have one parent
still living. They have two grown-up children
and four grandchildren and although they
wish to have a good retirement they feel
strongly that they want to help their
grandchildren get a foot on the housing ladder
and so are very keen to leave something to each
grandchild.
CASE STUDY 2
Mr & Mrs Henry, Ralph and Patricia, are also
aged 72 and 70 respectively. They are also
looking for advice on how to release equity from
their home worth £250,000. They have
discussed equity release with their only son
James, a company director. James is not
expecting an inheritance from his parents and
would prefer his parents to live comfortably in
retirement without money worries.
They want to release £25,000 to replace their
car, install a new central heating system in their
home and take a holiday.
They tell the adviser they feel they would be
fortunate if they lived another five to 10 years
based on fact that both Ralph and Patricia suffer
from health problems. Their attitude to house
price inflation is very positive and when asked to
give a figure, they expect house price growth to
continue over their lifetime.
[1] The long-term growth of the accumulated
mortgage plus interest may result in the
complete disposal of any equity in the property.
[2] A Home Reversion over a short term is
not normally good value unless the plan is
specifically structured to protect against early
death.
In many cases it will be the particular client
combination of attitudes and wishes that dictate
the final choice. If the adviser knows the
client(s) well enough, it should be possible to
identify one, possibly two products that are
1
The long term growth of the accumulated mortgage plus interest may result in the complete disposal of any equity in the property
2
A Home Reversion over a short term is not normally good value unless the plan is specifically structured to protect against early death.
www.mortgageintroducer.com July/August 2009 Mortgage Introducer
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