Common myths about equity release
The popularity of equity release has increased over recent years, however many people still don’t really know what equity release is or how it can help you achieve your goals.
Below are some misconceptions which can lead to people overlooking equity release as an option, but with equity release now a fully regulated industry, with many features in place to protect customers, equity release can be a great financial solution in later life.
The majority of the plans we recommend are lifetime mortgages, which offer a no negative equity guarantee, so you’ll never pay more than the value of your home, as long as it’s sold for a reasonable price.
With some equity release plans, you can opt to protect a percentage of your home’s value to guarantee an inheritance to your loved ones. This may limit the lenders who will offer you a plan, and it may also reduce the amount of the loan. This is something you can speak in detail about with your adviser.
With a lifetime mortgage, which are the majority of the plans we recommend, you continue to own 100% of your home. A lifetime mortgage is a loan secured against the property (like a standard mortgage you may have taken when buying your home), which will be repaid when you either move into long term care or pass away.
You can apply for a home reversion, which is when you sell all or part of your home to a lender. You will still retain the right to remain in the property for life.
Yes you can, and one of the top reasons for using equity release is to pay off an existing mortgage. As long as you’re eligible and have enough equity in your home to pay off the mortgage (or other monetary means to cover a shortfall between the amount of the loan and the outstanding mortgage), you can use equity release to pay off your existing mortgage.
You need to consider if equity release is the best option for you to do this, and this is something your adviser will discuss with you.
There are a couple of cost considerations you need to think about when deciding if equity release is right for you.
You need to work out, in the long term, whether the loan and the interest accrued is more or less expensive than other options of raising the money you need. Something which your adviser will discuss with you and you will be able to see in your detailed recommendation pack.
The advice and recommendation which our specialist advisers provide, including an initial fact finding appointment, a detailed, unique recommendation presentation pack is free of charge, and there is never any obligation to proceed. If you do apply, and once your case completes will our fixed fee of £1,695 become payable. The adviser will be with you throughout the whole of the process, right up until you receive your money.
The equity release industry is highly regulated, and the products which are offered by lenders have to meet a certain criteria, put in place to protect the consumer.
All advisers must be fully qualified to be able to give you honest, clear advice. Our advisers are also passed through a training course to ensure they meet our specific advice standards, as well as receiving continual monitoring.
Equity Release Associates are directly authorised by the Financial Conduct Authority (FCA) to give advice about equity release. This means we meet and adhere to regulations set out by the FCA to ensure that the consumer is protected.
We’re also members of the Equity Release Council, who are a governing body established to ensure standards and safeguards are in place within the sector, to give both advisers and consumers’ confidence in the products available to them.
The majority of equity release plans we recommend are bound by the Equity Release Council’s standards, one of which includes Portability. This means that you have to be allowed to transfer your plan to another property, provided it meets the lender’s criteria. There may be certain terms and conditions applicable to the new property, which you should discuss with your lender before committing to a property purchase. You may also be required to pay some or all of your loan and be subject to early repayment charges.
Some plans have a “drawdown” facility, which means that you’ll agree an overall amount of equity that can be released from your home, but only take the money in smaller amounts when you need it. With a lifetime mortgage, you’ll only begin to pay interest on it once you take the money, and it’ll be at the rate you fixed on your plan, which means if interest rates rise, you’ll benefit from the lower rate you secured on your plan.
Our advisers are committed to giving you the best advice for you, which is why they take time getting to know you, your circumstances and your objectives. If they believe that equity release is not in your best interests, they will tell you and recommend against equity release.
Our advice and recommendations are free, and you’re never under any obligation to proceed. If you do decide to release equity from your home, and only when your case completes and you receive your money, will our fixed fee of £1,695 be payable.