ER Important Considerations Flashcards
Moving to a smaller or cheaper property is one alternative to release, list the main disadvantages of this option?
There may be emotional attachments to the existing property
The homeowner may lose contact with friends and family if the move is to another area
The homeowner may have to give up clubs, et cetera, if the move is to another area
I move to a smaller property in the same area may not result in much capital being raised
Cheaper property may not be in a good area or may not be suitable
Other areas that may not be geared towards older people
What issues should be considered by those contemplating informal arrangements with family or friends as alternative to equity release?
The arrangement should be set up on legal footing, with legal advice taken by both parties and the agreement fully documented
The family’s friend financial circumstances could change this means they may withdraw from the arrangement and ask for repayment of the loan
Will the family be able to maintain the arrangement over the long-term?
Is the homeowner happy to beholden to the family or friend?
State five activities of daily living
Dressing
Eating
Mobility around the house
Being able to move from bed to an up right position, wheelchair or vice versa
Bathing
Why is negative equity a particular danger with rollup mortgage schemes?
If the plan holder lives to an old age property price reductions could lead to the planholders mortgage debt being more than the value of the property
Providers now provide a no negative equity guarantee, which means as a long as a customer abides by the terms and conditions of the plan the debt to the provider can never exceed the value of the property
Which independent charity works with older people to find solutions to enable them to stay in their homes for as long as they wish?
Care and repair England
What would a sensible timescale be to allow for the processing of an equity release plan?
6 to 8 week time scale from application to release funds
What risk was associated with investment linked annuities?
If the investment funds did not perform to expectations, the level of income would have reduced.
investing the lump sum produced by equity released in an annuity is no longer recommended by advisers
What are the two different ways in which joint property can be held?
Property can be held jointly in two ways
1) joint tenancy
2) Tenancy in common
List five common alternatives to equity release
Trading down
Grants
Sale and rent
Informal arrangements
Letting part of the property
Debt counselling
Using existing assets pension access, other borrowing and using legacies and inheritance
Why will an equity release provider expect vacant possession when the plan holder dies or moves into residential care?
Equity release schemes are based on the life expectancy of the plan holder and will end on their death at this point. The property will need to be sold for the outstanding loan can be paid.
