Capacity to Enter into an Equity Release Mortgage
At TSF we have seen an increase in clients deciding to raise capital on their homes. This could be for a number of reasons, including provision of care packages to enable a person to stay in their own home, inheritance tax planning or to make home improvements and adaptations.
Where there is a concern over a person’s ability to make a decision about entering into an agreement for an equity release product, we can assess their mental capacity.
Even when a client has an attorney assisting them under an LPA for property and finances, a mental capacity assessment is usually required to ensure that the client understands why they wish to enter into such an agreement and its’ salient details
What is the legal test used for an Equity Release / Lifetime Mortgage Mental Capacity Assessment?
A Mental Capacity Assessment for equity release / lifetime mortgage uses the Mental Capacity Act (2005) two stage test of capacity to determine whether a person lacks capacity to make the decision in question.
In order to satisfy this test, a cognitive impairment must be present (this is the diagnostic test) and the person will be assessed as to whether they are able to understand, retain, and use and weigh information specific to the decision being made (this is known as the functional test).
A Causative Nexus must be established, that is to say, there must be a link between the functional test and the diagnostic test in order for a person to be assessed as lacking capacity for a specific decision.
Assessment process
In order to complete a thorough assessment, we will request information such as the mortgage offer, details of the client’s property, income and outgoings, and the reasons for borrowing. This information will be kept strictly confidential and used to develop questions for the assessment and to verify the answers given.
The assessment can take place either by video link or face to face depending on your location. We will be guided by you as to the best time to assess and whether you need a supporting person in the assessment. We will also take into consideration any communication needs and adapt the assessment accordingly. The assessment will take the format of a conversation rather than it being a formal test.
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