Duncan Young

July 2007

An equity release Case Study question
Jon and Ellen are aged 65 and 67. They want to raise £75,000 towards the purchase of a property in Spain. They own a property in the UK worth £440,000 and want to consider equity release on the UK property to provide the funds they require because they do not have any real disposable income to service such a loan either here or in Spain. They want to repay the equity release after 18 months when an investment matures.

Response
In discussing the proposition with Jon and Ellen there are the normal fact finding questions which any broker would ask such as on health or attitude to house price inflation. However their plans call for two particular areas to be explored. The fact that they wish to repay the loan in 18 months may mean that equity release, notwithstanding the accrual of costs, is inappropriate. With one exception all equity release products have early redemption charges and these may make their plans uneconomic. An overdraft with their bank might actually be cheaper overall.

Secondly it is worth investigating whether Jon and Ellen plan to let out the holiday home to raise some additional income. There must be a chance of this as they seem quite tight on cash. In which case the tax position should be verified and a review of their state benefits carried out, as again it may be that the impact is greater than they had anticipated.

Back