What can you tell us about Brightstar’s new Later Life Lending service?
We have launched a Later Life Lending service for brokers, through a partnership with Sentry Lifetime. It means that brokers can offer a range of equity release solutions to their clients even if they do not hold the relevant qualifications. Just refer the client and you get a share of the proc fee on completion.
Why did you choose to partner with Sentry Lifetime?
Equity release is a specialist area, with its own qualifications and permissions and so it was important to partner with an expert. Sentry Lifetime has a really good team of qualified and experienced equity release professionals and they share our dedication to high standards and integrity. They take extra special care when discussing lifetime mortgage products with clients and often involve other family members in the process to ensure everyone is comfortable with the products and options. They can also discuss the implications on equity release and inheritance with the client in detail and, in some scenarios, put in place inheritance protections.
Why should brokers be interested in this market?
The demographics speak for themselves. By 2040, one in seven people in the UK will be aged 75 or over, according to the Joseph Rowntree Foundation, and the OECD says that there will be more than 35 people over 65 for every 100 of working age by 2025. Later life lending is therefore destined to become one of the biggest growth areas for brokers. At Brightstar, we now have the expertise to help brokers to find the right interest only mortgage into retirement, or the right lifetime mortgage – whichever best suits their circumstances.
How do lifetime mortgages work?
Lifetime mortgages are the most popular form of equity release as the borrower retains ownership of the property. Available to clients over the age of 55, a lifetime mortgage enables an individual to borrow against the equity in their home, without the need to make monthly repayments. Instead, interest is typically ‘rolled up’ and added to the balance, which is usually repaid from the sale of the clients’ home when they die or enter long term care.
The funds can be released as a lump sum or in smaller payments as a drawdown facility to be used as and when they’re required and there is a ‘no negative equity’ guarantee so a client or their estate’s beneficiaries will never be liable to pay anything over the value of their home. A borrower can also opt to include ‘inheritance protection’ with some plans that will guarantee an agreed percentage of their homes’ value to be passed down, irrelevant of how much interest is owed.
How are lifetime mortgages different to home reversion plans?
With a home reversion plan, a client sells part or all of their property at less than its market value to release a tax-free lump sum, a regular income or both. The client is able to remain in their home, as a lifetime tenant, on a rent-free basis. The client will usually only receive 20% to 60% of the value of the property, depending on the market value of their home, the clients’ age and status of their health and home reversion plans are generally considered to be high risk products, which could have a major impact on tax, benefits, inheritance and long-term financial planning. We have taken the decision not to offer home reversion plans as part of our Later Life Lending.
What should a broker do if they encounter a client who is interested in later life lending?
If later life lending is not an area in which you already specialise, just pick up the phone and give us a call. Don’t take the risk of dallying with this market – make sure you partner with an expert, so you can have the peace of mind that your clients are getting the right advice, every time.