Financial advisers and mortgage brokers have advised clients to exercise caution regarding spray foam and about the potential drawbacks of using spray foam roof insulation, noting that it could adversely impact their ability to re-mortgage or utilize equity release products.

As more individuals consider equity release as a way to access funds amidst the cost of living crisis, advisers are increasingly observing the negative repercussions for clients who have opted for spray foam insulation.

Traditionally, equity release lenders have been reluctant to accept properties with spray foam roof insulation, and many mortgage lenders also hesitate to offer mortgage deals for properties that have this type of insulation installed.

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What are the issues with spray foam insulation?

Spray foam is a liquid foam that expands to form an insulating layer, commonly applied in roofs and attics. It has been in use for over three decades, often without problems. However, concerns have emerged specifically with closed-cell spray foam, which can potentially endanger roof timbers due to decay.

Once hardened, closed-cell spray foam is more rigid, making it a superior insulator compared to open-cell foam. However, this rigidity also means it acts as a barrier that blocks air release, potentially diminishing ventilation and leading to condensation issues.

Due to these factors, lenders are cautious about refinancing properties with spray foam insulation, worried that it might cause structural damage and decrease the property’s value.

Homeowners alike are being told to exercise Caution Regarding Spray Foam insulation

Spray foam insulation was among the improvements supported by the government’s Green Homes Grant scheme, which concluded in March 2022. This scheme offered to cover up to two-thirds of the cost of certain home improvements.

As reported by the Residential Property Surveyors Association and the Property Care Association, by December 2021, approximately 250,000 homes in the UK had installed spray foam insulation.

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 re-mortgaging], 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.