Homeowners being declined for equity release due to clutter in their property became more common last year, according to More2Life.
Data from the lender showed ‘clutter’ in a property was the third most common reason for an application to be declined last year, compared to 2019 when it ranked sixth.
According to More2Life, excessive clutter can impact the property’s resale value by making it difficult for a surveyor to ascertain the integrity of its structure.
The lender added that clutter may have been less prevalent before the pandemic, as it would have been noticed during the face-to-face advice process and explained to customers.
Indeed, advisory service Equity Release Supermarket noted a rise in remote customer meetings, with half (51 per cent) of plans issued having originated over the phone last year, up from 40 per cent in 2019.
Dave Harris, chief executive officer at More2Life, 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.”
Harris also 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.”
According to More2Life, 8 per cent of equity release cases are declined, with properties where over 25 per cent of the roof is flat, or those close to commercial property, remaining the top two causes.
The most common reasons for equity release applications to be declined
| 2020 | 2019 | ||
| 1 | Flat Roof Over 25% of the roof is flat causing potential leaks | 1 | Commercial Property Proximity to a busy goods yard or pub will impact on the resale value |
| 2 | Commercial Property Proximity to a busy goods yard or pub will impact on the resale value | 2 | Flat Roof Over 25% of the roof is flat causing potential leaks |
| 3 | Clutter Extreme clutter can make it extremely difficult to ascertain the structural integrity of the building | 3 | Single Skim/Skin A property that typically does not have a cavity wall |
| 4 | Flood Risk Properties on a flood plain can be hard to insure and therefore this impacts the resale value | 4 | Flood Risk Properties on a flood plain can be hard to insure and therefore this impacts the resale value |
| 5 | Foam Certain types of cavity insulation are non-standard and may cause resale issues in the future. | 5 | Asbestos Asbestos is carcinogenic and would need to be removed to make the property safe and ensure the resale value |
| 6= | Structural Structural issues raised by the surveyor can mean that resale is not possible or the property is not safe | 6 | Clutter Extreme clutter can make it extremely difficult to ascertain the structural integrity of the building |
| 6= | Value Properties below the value of £75,000 are generally hard to take out equity release on as the no negative equity guarantee is more likely to come into play | 7 | Foam Certain types of cavity insulation are non-standard and may cause resale issues in the future. |
| 8 | Single Skim/Skin A property that typically does not have a cavity wall | 8 | Ex Local Authority The value of the property depends on other tenants maintaining the communal areas and large collective bills for issues such as roof maintenance may be charged. |
| 9 | Retention Some lenders allow retentions for essential works, this means some of the funds are held back and released upon completion of the works. However, these usually have set value limits that the retention cannot breach. It is possible that a case is declined if the cost of the works is greater than the allowable retention limit | 9 | Perform Worse In the opinion of the valuer the property will perform worse than your average property in the market place, usually because of its condition or location i.e. a property adjacent to a petrol station may take longer to sell than one that isn’t |
| 10 | Ex Local Authority The value of the property depends on other tenants maintaining the communal areas and large collective bills for issues such as roof maintenance may be charged. | 10 | Frame Timber framed buildings are of non-standard construction and may be harder to resell |
| Source: More2Life | |||
chloe.cheung@ft.com
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