Equity release and spray foam insulation

Does spray foam insulation hinder an equity release application?

Most residential properties in a good state of repair are generally suitable for equity release. But equity release providers may be unwilling to accept properties that have had spray foam insulation fitted.

To help explore the impact spray foam insulation can have on your home’s eligibility, we will be discussing the following:

• What is spray foam insulation?
• Why is spray foam a concern for equity release providers?
• Which properties with spray foam insulation might not be eligible for equity release? 
• Can I get equity release if I remove the insulation?
• What properties with spray foam insulation might be acceptable for equity release?
• Talk to an equity release adviser for further help. 

What is spray foam insulation?

Spray foam insulation – or spray polyurethane foam (SPF) – is a liquid foam that expands and solidifies to form an insulating layer. It can insulate your roof, loft, walls, floors and more to retain warmth and reduce energy costs.

There are two types of spray foam insulation to choose from:

• Closed-cell spray foam. This type sets into a firm solid. It contains lots of separate pockets of gas that slow down the movement of heat through it, which typically makes it a better insulation product than open-cell spray foam. However, it’s also a barrier to moisture, so you’ll need to make sure your room or loft has good ventilation to avoid the build-up of condensation.

• Open-cell spray foam. Open-cell spray foam is less dense once set; you can even compress it with your hand. This means you will need to install a thicker layer to get the same level of insulation. As it blocks and reduces airflow, open-cell spray foam works as sound insulation, too. It allows moisture through, too, so there’s less chance of condensation building up.

Why is spray foam a concern for equity release providers?

Spray foam insulation has been popular with homeowners for many years now. But it can cause problems when you come to arrange equity release, sell your home or get a new mortgage.

This is because spray foam can cause serious issues for properties. For instance, spray foam insulation restricts airflow. The water-resistant insulation may cause condensation to dampen your roof timbers, leading them to rot, weaken and potentially collapse. The repair bills for this kind of damage can be very costly.

So why does this affect an equity release application? It’s to do with future-proofing the sale of your home one day. 

Your estate typically repays your equity release loan plus interest when you pass away or move into long-term care. At this point your provider will recoup their money through the sale of your property, so they won’t want anything to affect that.

Providers need your home’s value to remain high enough to cover the full amount due. They will also want to be able to sell the property without unnecessary delays. This is why there are some types of property not suitable for equity release, including those with spray foam insulation.

Which properties with spray foam insulation might not be eligible for equity release?

Some properties may automatically be a ‘no’ for equity release and having spray foam can fast track a home to that list unfortunately. 

There are exceptions though; it ultimately comes down to the lender’s criteria, the construction of your home, where the spray foam is and when the insulation was done. Lenders are much more tolerant to spray foam if it has been there since construction.

As examples, providers such as Aviva, Just and Canada Life will not accept any properties with spray foam insulation on the underside of the roof or in the roof void. 

In addition, Aviva will not accept timber or metal/steel framed properties with cavity wall insulation done after the original construction. The lender ‘Just’ will not accept properties with timber frames that have cavity wall insulation done after construction.

Can I get equity release if I remove the insulation?

If you have spray foam insulation in your home and cannot get equity release then you may be thinking about doing away with your spray foam.

The good news is that you may be able to submit a successful application after having the spray foam taken out. However, this is a considerable and expensive undertaking as it does get into every nook and cranny. 

To ensure you do not commence this enormous job in vain, it’s important you talk to an equity release adviser BEFORE removing the spray foam. They can check if there is a provider who might accept you on the basis of you going through with the work and can liaise with them on your behalf.

If you do decide to go ahead with the work, be sure to use a specialist spray foam removal service and do not attempt to do it yourself. Reclaiming wood that has spray foam insulation set on it can create toxic dust. Using a specialist to carry out the work won’t just help your equity release application, it can make the process much safer for you, too.

Another option is to take out a home reversion plan rather than the more popular lifetime mortgage. This is where you sell all or part of your home at less than market value. You then remain in your home rent-free for the rest of your life or until you move into long-term care. Providers of home reversion are more likely to accept properties with spray foam insulation.

What properties with spray foam insulation might be acceptable for equity release?

In general, a lender might accept a property if the builder had the spray foam insulation done at the time of construction. The reason for this is because the builder will have taken steps to ensure the spray foam would not cause issues for the property in years to come.

Talk to an equity release adviser for further help. 

The best way to find out if you and your home could be eligible for equity release is to speak to an equity release specialist. Our selected advisers will be able to search across leading providers to check your property’s suitability for equity release.

Please call 0808 178 3055, or request a call back for a time that suits you. Alternatively, check your eligibility and get an initial indication of how much tax-free cash you could unlock.

About Clare Yates. With over a decade’s experience writing about later life financial planning, Clare offers a wealth of knowledge about equity release, pension annuities, wills, LPAs and more. When she isn’t writing, Clare likes to spend her time baking and going on walks with her husband, two children and their rescue dog. Follow Clare on LinkedIn