Chapter 2

Question 1

Proceeds of an equity release plan can be used in 3 main ways

Answer 1

. Meet an immediate capital need
. Meet capital needs now and future and
. Provide a source of income

Question 2

Most popular use of equity release

Answer 2

. 38% paying of mortgage
. 37% home/garden improvement
. 29% paying debt
. 20% gifting to family/friends
. 9% holiday

Question 3

Two types of homeowners that need equity release

Answer 3

. Need Sale
. Aspirational sale

Question 4

Average cost of care

Answer 4

. £35k a year or 49k with a nurse

Question 5

Where should the customer be referred if needing to talk about debt

Answer 5

Debt counselling is a regulated activity. The advisor should refer customer to stepchange or national debt if not to do with equity release

Question 6

Occupational pensions increase in line with?

Answer 6

Consumer prices index rather than average earnings

Question 7

What consumer guidance was released after the so called pension freedoms?

Answer 7

Pension wise to help educate consumers on their available choicea

Question 8

Holding cash on deposit could affect?

Answer 8

• Customers right to means tested benefits
• rare cases very old clients, may affect married couples allowance (1 spouse born before 6th april 1935 are entitled to additional allowance

Question 9

Draw downs

Answer 9

• not taxable
• does not affect marriage allowance
• does not affect means tested benefits

Question 10

Drawbacks on drawdown

Answer 10

• reductions in property price could lead to restricted withdrawals
• its common for fuether witbdrawals to be charged at interest rate at the time resulting in more interest roll up
• the lender could withdraw from market altogether

Question 11

Portability

Answer 11

• lifetime must meet LTV normal parameters. If higher homeowner must make partial payment
• home reversion plan - moving to a less expensive property may mean a payment is needed

Question 12

Flexibility

Answer 12

• does the product allow for spouse to he added?
• part of complete repayment?
• allow for a move to shelterd accommodation?
• any payment if planholdee goes into long-term care or dies in short term?

Question 13

Lifetime mortgage requirements - applicant

Answer 13

• minimum age is 55 for many schemes
• uses youngest age for joint application
• may be no maximum age
• joint - the loan is not repayable until second death/long term care

Question 14

Home reversion plan - applicant

Answer 14

• minimum age 60
• youngest age for joint
• may be no max age
• joint - property not sold until second death/long term care

Question 15

Lifetime requirements - property

Answer 15

• typical minimum property is 70k
• borrowes a % of the property
• secured as first loan

Question 16

Home reversion requirements - property

Answer 16

• minimum property value 80k
• must be in condition of repair acceptable to lender

Question 17

Properties not usually accepted or extra criteria

Answer 17

• leasehold - minimum term exists
• prefabricated/mobile phones or retirement flats not usually accepted