TOPIC 2 Flashcards
Why are older homeowners often described as asset rich but cash poor?
The family home has always been seen as most people’s largest capital asset and this situation has been exaggerated by rising values. it would not be at all unusual to find a pensioner couple living on £250 a week, but owning outright a house worth £180,000 or more.
What is trading down and why’re some older homeowners reluctant to do it?
Trading down is to sell a property and move to a smaller, cheaper property. In some cases, moving would cause emotional strain.
Why might a retired individual require a larger emergency fund than someone still in work?
With retirement comes the increasing likelihood of ill-health or mobility problems and some retired people may want to pay for private medical treatment.
What are the three main ways in which the proceeds of an equity release plan can be used?
To meet an immediate capital need; to meet capital needs both now and in future; and to provide a source of income.
What is meant by the term “drawdown” in relation to equity release plans?
Rather than taking the maximum possible proceeds from the equity release plan upfront, the customer takes only what they require to meet their immediate needs. This gives the customer peace of mind knowing that there are further funds on which to draw in the future.
How much is the residence nil-rate band in 2019/20?
£150,000 (2019/20) for each person who leaves their main residence to a direct descendant.
From the adviser’s perspective, the decision regarding the suitability of equity release in general, and the choice of a specific product, will depend on which five factors?
The customer’s needs; their personal and financial circumstances; their preferences; their objectives; and their aspirations.
How does taking out a lifetime mortgage affect a person’s estate on death?
The amount borrowed plus accrued interest would be a debt against the estate and would have to be repaid on death.
What are the downsides of leaving the proceeds of an equity release plan on deposit in a bank or building society account?
Holding the cash on deposit could affect the customer’s right to means-tested benefits and may also affect the Married Couples Allowance.
What is an annuity?
An annuity, in this context, is a regular income that has been bought with the proceeds of an equity release plan.
What is the typical minimum age at which someone could apply for home reversion plan?
The minimum age for a home reversion plan is typically 60.
