Equity release: Honesty results in the best policy

Stuart Wilson wants to know how much you really weigh. Don't worry, it's all in a good cause...

How much do you weigh? I realise you can’t physically reply to my question but I bet you have a figure in your head right now.

The one you’d tell your partner, your work colleague, your doctor if they asked you the same thing. And I’ll bet my moderately-priced three-bedroom house that you are lying – at least to yourself.

That may seem presumptuous and not a little rude given we have never met but I have science on my side.

According to the British Medical Journal, a recent study showed that a fifth of UK adults who consider themselves to be of a normal weight are actually overweight – one-third who think themselves overweight are, in fact, clinically obese.

The same goes for smoking, drinking and exercise. We tend to err on the side of optimistic when it comes to revealing the truth about our health and well-being to someone else – it’s amazing how many people stick to the recommended weekly limit for alcohol consumption!

Everybody lies

So, imagine you are now sitting in front of a client, about to discuss equity release. Imagine you have got to the point in the discussion where you want to ask about their health. How truthful do you think they are going to be with you?

According to research we carried out recently, potentially not very truthful at all.

In fact, one in four advisers we spoke to said they had experienced clients not being truthful about their medical history.

According to 39% of these advisers, the reason for this was that clients felt embarrassed about revealing the truth – 28% said it was because clients felt it would count against them, restricting their loan or perhaps even stopping them qualifying for one altogether.

And this lack of veracity can be a big problem. If we take a 70-year-old as an example, the loan-to-value they can qualify for can range from about 34% if they are a picture of good health, through to 53% if they are at the opposite end of the health spectrum.

That’s a difference of almost £40,000 in lending based on a house valued at £200,000, around the UK average.

And in between those extremes, even relatively “minor” conditions such as high blood pressure can make a huge difference to the size of loan or drawdown facility they can get.

In other words, knocking off a few pounds of weight here and perhaps not disclosing a prescribed medication there could restrict a client’s lending by thousands of pounds. And that could make a substantial difference to their financial outcome in retirement.

Our research goes to underline that it’s not just about asking health questions but the way in which you ask them that’s important. Setting the scene, explaining why you are asking them about their health, the importance of being truthful and the impact it can have on their loan are just as important as the questions themselves.

Honesty, when it comes to a lifetime mortgage, can definitely lead to a better ‘policy’ in terms of the lending solution the clients gets.

Stuart Wilson is technical director at more 2 life