More2life has looked at the reasons why equity release cases are declined in order to help advisers better manage clients’ expectations.
Presently, 8% of equity release cases are rejected.
While criteria does typically vary from funder to funder, homes with flat roofs that take up more than 25% of the property, those close to commercial property or filled with clutter that makes a valuation difficult are less likely to be accepted.
The most common reasons equity release applications were declined in 2020 vs 2019:
| 2020 | 2019 | ||
| 1 | Flat Roof (i.e. over 25%) | 1 | Commercial Property |
| 2 | Commercial Property | 2 | Flat Roof (i.e. over 25%) |
| 3. | Clutter | 3 | Single Skim/Skin |
| 4 | Flood Risk | 4 | Flood Risk |
| 5. | Foam | 5 | Asbestos |
| 6.= | Structural | 6 | Clutter |
| 6.= | Value (i.e. typically > £75,000) | 7 | Foam |
| 8 | Single Skim/Skin | 8 | Ex Local Authority |
| 9 | Retention | 9 | Perform Worse |
| 10 | Ex Local Authority | 10 | Frame |
While flat roofs, proximity to commercial property and flood risk have been consistent barriers over the last two years, single skim (i.e. no cavity wall) has fallen out of the top four to be replaced by clutter.
More2life said “excessive clutter” can make it extremely difficult for a surveyor to ascertain the integrity of the structure so many impact the resale value. Prior to the pandemic, this may have been less prevalent as it will have been noticed during the face-to-face advice process and explained to the customers. Asbestos has also fallen out of the top 10 as historic issues around this material become less common as they are rectified by homeowners but the use of foam remains an ongoing issue.
Dave Harris (pictured), CEO at more2life, said: “While the vast majority of cases move from offer to completion smoothly, some issues with properties that will impact the final resale value mean that they are more likely to be declined. It is vital that advisers know that properties with large flat roofs near commercial premises with foam insulation may struggle to be accepted so they can manage their clients’ expectations.
“That said with the pandemic restrictions and more advice than ever before being provided remotely, it has become far harder for advisers to pick up on details such as clutter or notice that something is not quite right with a structure. An in-depth and wide ranging discussion as part of the advice process can help – especially if any concerns are shared with the client and the lender.
“Every funder has slightly different criteria and as more2life work with a variety of different organisations, we are in the fortunate position that we can help the vast majority of our customers but we believe it is important to educate advisers on these common reasons for decline so that clients are not disappointed.”