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	Here at Equity Release Partners we understand that identifying potential customers for equity release can be tricky. To help with this process, we have identified that it’s important to understand the priorities your clients have for their spending in retirement. The easiest way to visualise this set of priorities is using a retirement pyramid. The pyramid below illustrates the various building blocks of retirement income/spending needs in order of importance. The 'possible solutions' highlight how equity release schemes could benefit clients in such scenarios. These solutions can therefore provide you with an angle with which to sell the equity release concept to them. Mark     Immediate concerns and debt Situation: At the very base of the pyramid are the client’s most fundamental needs: the immediate concerns and debt. Clearance of high cost consumer debt will usually be their first priority. In addition, lenders are demanding repayment of their mortgage book due to age or term reasons. Therefore, homeowners not wishing to downsize, need to find alternative repayment vehicles which can be difficult to find at, or in retirement . Possible solution: Dependent upon loan-to-value ratio’s there could be a solution derived from a lump sum lifetime mortgage. The maximum a 60-year-old could release is up to 30.5% of their property value at a fixed lifetime interest rate of 6.12% (6.35% typical APR). This plan comes with the option to pay back up to 10% of the original amount borrowed with no penalty & require no proof of income. Essential income Situation: This is the basic income most people need to cover their day-to-day living costs. This includes items such as food, clothing, housing bills and maintenance and running a car. If your client is struggling to meet these expenses, they would have to make major adjustments to their finances, potentially moving to downsize their home. Possible solution: For many people at, or in retirement, moving house can be too stressful after having been resident for many years. Should they require additional income to support their budget, then a drawdown lifetime mortgage could assist, alleviating the need to move. By taking a small initial lump sum, followed by further drawdowns as & when required this can help budgeting significantly. Just in case fund Situation: Strictly speaking this is an emergency fund which behaves ‘statically’ rather than part of a client’s income and expenditure. However, most clients are keen to maintain this “just in case” fund which should cover around six months’ worth of essential income needs and usually kept as cash savings. Possible solution: The key to successful equity release advice is to recommend the client only takes what they need to spend over the first 12 months. By not having too much savings in the bank at the expense of taking equity from their property is best practice given the low rates of interest currently. Freedom income Situation: Once a comfortable retirement income has been established to meet daily living expenses, clients may wish to consider the “freedom” of disposable expenditure. This may reflect the level of income and expenditure they have become used to in the years leading up to retirement. It should be noted that people have different perspectives on spending levels & can vary significantly. Possible solution: Advice should always be tailored to an individual’s needs and lifetime mortgages are no different. Where disposable income is significant, then retirement products could be considered if proof of income is no problem. Therefore, lower interest rates and reduced longevity in contract along with early repayment charges could be achieved. Gifts Situation: With mostly increasing levels of equity tied up their property, parents may wish to help family members. An early inheritance may allow them to assist younger relatives with education costs, getting onto the housing ladder or setting up in business. Some clients may also wish to make significant charitable donations or use as a tool towards inheritance tax mitigation. Possible solution: Assuming a specific amount is required to help relatives, then interest rate can usually be the most important factor in the recommendation of a lifetime mortgage. During 2015 we have seen the lowest rates on record with sub 5% fixed lifetime interest rates available. Currently, the market is in a period of innovation & competition, so hopefully we’ll see more competitive rates into 2016. Dreams Situation: At the top of the pyramid are the dream purchases and spending. These could be high cost holidays such as cruises, expensive cars or second homes that often reflect life-long dreams of clients. There comes a point in life where all that hard work and bringing up the family should pay its rewards! Possible solution: Intentional one-off purchases would usually be satisfied via a single lump sum lifetime mortgage product with no frills; just the lowest rate needed. This may encompass a fixed early repayment charge period, should the client eventually downsize and want the option to it pay off completely. Click to use your free Equity Release Tools We've created these handy tools on our website for you to use and help generate equity release referrals with your clients. Once registered, you will also have access to a suite of marketing materials & downloads. Issued for use with intermediaries. Information not approved for use with customers
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