Equity release schemes have emerged as one of the most feasible solutions for people over the age of 55 to secure their future after retirement. Equity release companies, as well as brokers, have a ‘guarding body’ in the form of the Equity Release Council to ensure that none of the consumers are at any kind of financial risk while choosing an equity release scheme. The Equity Release Council, formerly known as Safe Home Income Plan was launched as a new trade body to regulate and guide the complete equity release sector.
What the Equity Release Council Does
It includes the membership of anyone and everyone working in the equity release industry such as lawyers, surveyors, qualified financial advisers, intermediaries and solicitors. It is more of a self regulated body to ensure that the interests of the customers always remains the top priority.
Equity release empowers consumers to release the equity held idle in their home without losing their ownership on their property. They also get to live in the home as long as they are alive or they don’t shift permanently to a long term care home.
Home Reversion Products and Lifetime Mortgages are the two equity release schemes, which are regulated by the Equity Release Council in the UK. Buying an equity release scheme safeguards the interest of consumers to ensure that there is a fair treatment to their vested interest in these schemes. People taking an equity release on their home have an option that allows them to remain free from making any monthly payments against their borrowing.
The interest keeps on accumulating on the basis of compound interest and after the death of the consumer the estate is sold off to make the repayment. The best part of equity release schemes is the promise of no negative equity guarantee, meaning that even if the value of your estate goes down, you are never asked to pay any debts over and above the value of your estate.
Home Reversion in Detail
Much of the discussion has focused on lifetime mortgages. Home reversion plans are different. They do allow a person to stay in their home and release equity. The difference lies in owning or selling the home. Home reversion requires a partial home sale to unlock a bit of equity. It can also be the entire home, where the homeowner still gets to live in the home for free because of the lifetime tenancy agreement. No money is paid back in the end and there is no interest accrual. For some, this feels more secure, but most often it feels less secure as ownership, at least a portion of it, exchanges hands.
Equity Release Providers
Equity release companies must follow a set of rules created by the Equity Release Council, the Financial Conduct Authority and SHIP. There are several providers in the market but it is vital to buy or even receive advice from FCA approved companies to enjoy all the benefits associated with equity release schemes. Equity release schemes approved by the FCA follows the same footsteps of SHIP, having similar objectives to spread awareness and safeguard the interests of consumers at large.
You also want to double check on the broker you choose. They should have proper credentials and qualifications for the equity release industry to be able to sell to you and discuss these products. If you find you are not receiving helpful advice or you feel the person is not being honest, you have recourse. However, it is far better to look at their credentials and choose from an independent broker versus a person directly linked to one of the equity release providers.
Brokers working for a company are often tied in what they can say. They may only be able to talk about other products on the market with you if you bring them up. If you do not they are not held to any sort of requirement. It can lead to biased information that does not suit your situation.
Now that you have information about the types of equity release and equity release companies and their regulatory bodies, you can begin your search for an equity plan. Make certain the plan is right for you and always consider how much you take out versus what you wish to leave for inheritance. You have protections in place to ensure an inheritance can be left behind, as long as you ask for them, including the no negative equity guarantee clause already discussed above.