10 Facts You Must Know About Equity Release
If you are considering releasing equity from your property, you’ll undoubtedly have read and heard a number of conflicting reports about equity release products. This can make the hugely important financial decision even more complicated and convoluted – at a time when it is imperative you make the right choice for your personal situation. Bearing that in mind, we have compiled the 10 facts about equity release you simply must know.
All equity release products are regulated by the FCA
All equity release products are regulated by the Financial Conduct Authority (FCA). The Equity Release Council (ERC) is the industry trade body who provides additional support to the equity release sector to make sure that equity release lenders always operate with their customers’ best interests at heart.
Equity release advisors have to be qualified
And to help you determine if you are receiving advice and assistance from a qualified professional, there are a number of equity release qualifications you should be looking for. The CeRER (Certificate in Regulated Equity Release) and CeMAP (Certificate in Mortgage Advice and Practice) along with Certs CII (MP&ER) are the most common qualifications to look out for.
The Debt Won’t Be Passed On
In the unlikely event that the value of your house has decreased significantly, it is possible that it might not be worth enough to cover the amount which you owe. The “no negative equity guarantee” means that if this turns out to be the case, the remainder of the loan would be written off.
Low value properties may not be eligible
The vast majority of equity release lenders will not consider releasing equity from properties with a value of less than £70,000.
Under 55s are not eligible
Aimed at home owners approaching retirement age, you will not be considered for an equity release plan if you are under 55 years of age. And those seeking a Home Reversion Plan will not be considered if under the age of 65 years.
Some property types are not eligible
Property types with limited value on the open market are traditionally rejected by equity release lenders, these include:
- Retirement properties
- Static/mobile homes
- Studio/basement flats
- Hotels/guest houses
You can still move home after releasing equity
Releasing equity does not necessarily fix you to one address for the duration of the plan. However some restrictions do apply: if you are planning on moving home, it must be to a property which is deemed suitable – a property which would be accepted by the lender as if a new customer was seeking an equity release product.
If you have taken a Lifetime Mortgage and wish to downsize to a lower valued property, then the lender may require part of the loan be repaid to keep it within their limits at the time. They will waive any Early Repayment Charges if they require that you do this.
Early repayment charges may apply
Lifetime Mortgages are designed to be repaid when the last borrower dies or moves into long term care. Lenders may impose early repayment charges if the plan comes to an end earlier than agreed. It is therefore important to discuss your situation with a qualified advisor, as there may be other suitable lifetime mortgages available that have fixed or more favourable early repayment charges.
Those with medical conditions may be entitled to an enhanced amount
You may be pleased to discover that existing medical conditions may put you in a favourable position when looking to release equity from your home.
Retirement Specialists, Age Partnership, expand: “Your application for an equity release plan may actually benefit if you are overweight, a smoker, a drinker, or suffer from pre-existing conditions such as high blood pressure or diabetes.” Having these medical conditions may allow you to obtain an enhanced amount.
There are alternatives to equity release
And finally, releasing equity is far from last chance saloon. Taking out an equity release plan is a large personal investment, and the decision should not be taken without considering such alternatives:
- Using existing assets
- Help from family members
- Taking in a lodger
If, after considering these alternatives, an equity release plan seems the best course of action – then it may be time to contact an experience advisor and trusted lenders.
Equity release may involve a lifetime mortgage or reversion plan. To understand the features and risks, ask for a personalised illustration.