Advisers issue mortgage warning against use of spray foam insulation

Financial advisers and mortgage brokers have warned clients to be wary of using spray foam roof insulation as it can negatively affect their ability to remortgage and use equity release products.

With more people turning to equity release as a means of accessing cash during the cost of living crisis, advisers are witnessing more clients experience the downside of choosing to use spray foam insulation.

Historically equity release lenders will not accept a property with spray foam roof insulation, and many mortgage lenders will not offer a mortgage deal for properties that have it installed.

The use of spray foam insulation was one of the measures covered by the government’s green homes grant scheme, which closed in March 2022 and covered up to two-thirds the cost of home improvements.

According to the Residential Property Surveyors Association and the Property Care Association, as of December 2021 there were around 250,000 homes with spray foam insulation in the UK. 

If lenders and surveyors can’t agree on a sensible view on spray foam insulation then homeowners need to be warned up-front Paula Higgins, HomeOwner Alliance

PFEP Wealth Management managing director, Richard Bishop told FTAdviser that homeowners would install the insulation without thinking they would be affected by the downsides, but the cost of living crisis has meant he is now seeing people regret their decision.

“With the problems with inflation and the cost of living rises we are seeing a small number of clients who didn't realise equity release is also affected by foam installation,” Bishop said.

“The fitting companies have been telling clients the issue [with remortgaging], not making it clear that equity release is also affected. More elderly clients 12 months ago would not have thought they may ever use an equity release product in the future.”

He added: “As we advise clients, always think a decision you make today could have catastrophic effects on your future financial planning. You shouldn't install anything in your home that could affect its overall value in terms of any possible future lending.”

Les Pick, director of manufacturing and adviser propositions at later life lender More2life noted that the challenge with spray foam is that it is not widely regulated. 

“Incorrectly installed spray foam can cause serious issues over the long-term including water damage that can ultimately require the roof to be stripped back and replaced,” Pick said.

“Insulation is vital but homeowners need to be careful about the choices they make as they can impact the value of their home.

“Typically, equity release lenders are very wary of spray foam and few are able to accept it,” he added but pointed out that some lenders do accept it once it meets certain criteria. 

Government schemes

In June of this year, the government said it had no plans to intervene where property values or access to mortgage finance had been affected as a result of spray foam insulation using green home grant vouchers.

Property advice website HomeOwner Alliance are now campaigning to ensure spray foam insulation does not make it onto the list of approved insulation under the government’s ECO+ scheme.

Announced as part of the Autumn Statement, the government's ECO+ scheme will see £1bn in funding made available to improve energy efficiency in homes.