Are you looking to release equity from your home?
If so, it is essential to find a 3rd party financial adviser to help you along this journey. They will be available to answer all your questions, guide you on the process, and help you find the perfect plan to suit your needs.
When looking for a financial adviser, you might want to consider those who have extensive knowledge of equity release or specialise in the field.
This comprehensive article will help guide you in the right direction, highlighting why finding the right financial adviser is an essential need when releasing equity from your home.
What You MUST Know
Before you continue reading, we’ve summed up the most important information about equity release in this quick video. Check it out!
Where to Find an Equity Release Adviser
It is important to find the right financial adviser to suit your needs. There are various channels to look at.
You can find a financial adviser by:
- Searching for available professionals around you on Google.
- Searching on the Equity Release Council’s website.
- Looking at your local media outlets and notice boards.
- Asking friends and family members for personal referrals.
- Via searches on social media channels.
Pro Tip: Look for someone who specialises in equity release.
5 Reasons You Should Seek Equity Release Advice
Equity release is a massive industry in the UK, making it overwhelming for professionals, let alone individuals with little knowledge of the business.
It is for this and the following 5 reasons that it’s essential to seek proper equity release advice:
1. There’s a Huge Variety of Products Available
As mentioned above, the equity release industry is booming, and with this, there are a massive amount of products and providers available on the market.
They all offer unique deals, including varied interest rates and policies. In addition, you might qualify for some plans and policies, but not for others, due to your age, state of health and property value.
Additionally, different types of equity release are available on the market, with the main ones being a home reversion scheme and lifetime mortgage.
Learn more about: 2 Main Types of Equity Release
2. Equity Release Advice Can Save You Money
Does this mean that spending money can save you money?
The reason for this is somewhat similar to the above, as, with the number of suppliers out there, you might miss the best deals.
In addition, having a professional on your side means that you will be guided towards a legitimate provider who is a member of the Equity Release Council.
In a nutshell, the council’s role is to protect the customer, ensuring that you don’t spend more money than you need to.
Finally, your financial adviser will help you find the best plan for your home.
3. The Cost of Equity Release can be High
If not done correctly, the cost of equity release can be extremely high, leaving little or no inheritance for your family members.
While equity release interest rates are at an all-time low, you might still get caught signing up for a plan that will cost you a lot more than you need to pay.
If caught with a too-high interest rate, the rolling interest on your loan can be huge when you pass away or move into a care home.
Luckily, the Equity Release Council’s ‘no negative equity guarantee’ means that your family will never owe more than the value of your home. However, you still don’t want to be left paying more than you need to.
While your financial adviser will cost you money, they will also likely save you time, effort, and money in the long run.
4. Protect Your Family’s Inheritance
For many, leaving a financial legacy is essential. When releasing equity from your home, you are essentially spending some of what is due to be left to your heirs.
If you wish, your financial adviser can help you find a plan that can protect some of your estate, which will then be a guaranteed part of your inheritance.
5. Equity Release May Not be Suitable for You
Releasing equity from your home is a significant decision and should not be taken lightly. Like with all financial products, there are risks involved.
You must, therefore, seek the proper advice and consult with a professional to ensure that you are making the right decision. You don’t want to release equity from your home, only to regret it later.
4 Tips for Choosing the BEST Adviser
You should probably shop around before settling on a financial advisor to guide you through your equity release journey.
Here are 4 tips to help find the perfect advisor for you!
Consider if All Advisers Equal
The short answer is no.
Advisers will differ according to experience, education and specialities. However, all advisers fit into 2 categories.
- Some are ‘whole of market’ advisers. They have access to all products and plans available on the market and will find the best option for your home.
- The other type, ‘restricted advisers’, work with limited providers and plans, ones that suit most of their clients. They will recommend your plan based on one of these.
It is advisable to look for a whole market adviser as they have a broader, holistic range of providers and plans to choose from.
In addition, you get Mortgage Only Advisers and Independent Financial Advisers (aka IFA’s); both can advise on equity release plans.
What’s the difference?
Understand Mortgage Advisers
When it comes to a Mortgage Adviser, you need to be careful when making your selection. Some Mortgage Advisers do not specialise in equity release, usually only working with traditional mortgages.
However, other Mortgage Advisers might have additional equity release qualifications, so it’s worth inquiring.
Understand Financial Advisers
Independent Financial Advisers (IFA’s) hold completely different qualifications to Mortgage Advisers, but can consult on equity release, should they wish to enter the field. You can find out from your prospective Financial Adviser if they have an equity release qualification.
In fact, only a limited number of those with relevant mortgage qualifications and experience have the relevant equity release qualifications. Like regular Mortgage Advisers, many don’t advise on equity release lifetime mortgages either.
Discover more about: What’s a Lifetime Mortgage?
Know if an IFA is Preferable
Most will advise you to rather work with an Independent Financial Adviser when taking out an equity release plan. Look for someone with specific equity release qualifications, as they are bound to give the best guidance.
13 Questions You MUST Ask Your Adviser
Have you finally settled on the right adviser for you? What’s next?
Now it’s time to get all the right information from your adviser. Ask these 13 essential questions:
1. Do you advise on all types of equity release?
There are 2 main types of equity release to ask about, a lifetime mortgage and a home reversion scheme.
In addition, if possible, find an adviser that works with residential mortgages, interest-only mortgages and retirement interest-only mortgages. This way, they will know where to find the best deal and lowest interest rates.
2. What are the costs associated with an equity release plan?
There are some costs involved with equity release, including application fees, valuation fees, and the cost of advice.
You can use some of the equity you release to cover the costs involved.
3. Does the Equity Release Council safeguard me?
As mentioned previously, you MUST make sure that your financial adviser works with members of the Equity Release Council.
4. How do you choose the right plan for me?
There are many different plans on the market and what’s right for you will be determined by a range of factors including:
- Your age
- Your spouse’s age
- The value of your property
- The condition of your property
- The condition of your health
- How much equity you want to release
5. What are my alternatives to equity release?
Releasing equity from your home is a massive decision. Before you do so, be sure to ask your adviser about the equity release alternatives.
Once you have considered all alternatives, then you might find that equity release is, in fact, the right decision for you.
6. How do you decide what initial advance, and what reserve I should have?
An initial advance refers to the money that you first receive, and a reserve facility is a pre-agreed amount of money that you will receive directly from the lender.
Take out the initial amount of money based on the expenses that you foresee. Set up a reserve facility for the remaining funds.
Note: You will pay interest on the first reserve.
7. What state benefits will I lose with an equity release plan?
With equity release, you may no longer qualify for state benefits. You must ask your adviser about this so that you can make an informed decision.
Get to know: 7 Equity Release Pitfalls
8. How much can I borrow on a RIO?
RIO is a Retirement Interest Only mortgage. RIO’s require monthly interest payments, unlike equity release. However, RIO interest rates are often lower.
The amount you can borrow determined by your property value, and income and income and expenditure. You can generally loan 4 to 4.5 times your income, as long as it’s 80% of the value of your property.
Your financial adviser will be able to further advise you on an RIO.
9. What are the downsides to taking out equity release?
You must know all the pros and cons of equity release before making your final decision.
10. On which lenders plans do you advise?
With numerous lenders on the market, ask your adviser to help you find the best possible plan for you. They will direct you towards everything you need to know about equity release.
11. Will I be able to have other people living with me in the future?
Ageing might bring the need for in-home care or family members moving in to assist. In fact, you might want to use the equity released from your home to cover professional care, rather than opting for a facility.
You need to check this with your provider so that you know all the facts before selecting an equity release plan.
12. Will the provider change the terms/interest rate in the future?
13. What happens if I need more money in the future?
This is a great question!
Perhaps speak to your advisor about releasing equity in smaller increments, to ensure that you are always liquid.
Equity Release Advice vs Legal Equity Release Advice
In addition to financial advice, you will also require independent legal advice from a solicitor, as per a ruling by the Equity Release Council. Both the lender and the individual taking out a plan need a solicitor to avoid any legal disagreements.
As a customer, your solicitor’s role is to make sure you understand your plan’s legal implications and ensure you are releasing equity at your own will. They will also check title deeds, buildings insurance and arrange the completion and money transfer dates.
The Equity Release Council’s website has a list of solicitors offering equity release advice so you can find one in your area. You can also ask your financial adviser to help you find the right person.
The Cost of Equity Release Advice
The cost of equity release advice will differ from one lender to the next. You can usually pay anything from £900 to about £2000.
When shopping around for an adviser, and you have narrowed it down to 2, perhaps add cost to your consideration.
The best advice is worth the investment.
Got Questions? Check These First!
Do I Need Legal Advise?
The short answer is yes.
In line with regulations set out by The Equity Release Council, you are required to use a solicitor on your equity release journey.
Why Do I Do if I Get Bad Advise From My Adviser?
Should you not trust the advice you have received, it would be wise to get a second opinion. Releasing equity from your home is a big deal and needs to be done with caution.
Can Equity Release be Mis-Sold?
Yes, it can. According to the FCA, some lenders do mis-sell equity release plans. If, for instance, you get an equity release plan and you haven’t met the minimum age requirement, 55, then you might have been mis-sold the equity release plan.
There are ways you can know if your lender mis-sold the equity release plan. These include circumstances like:
- If you also took out the equity release scheme for over 60% of the value of your estate;
- If they didn’t offer you fixed interest rates on the mortgage or they didn’t put an upper limit on the variable interest rates;
- If the plan provider didn’t offer you the option or allow you to remain in your property for life until the plan term ends when you die or move into long-term care;
- If you wanted to move houses, but you didn’t discuss, or the lender didn’t offer you that option;
- If there’s no provision to guarantee your mortgage when there are not enough funds after the sales costs, estate agent fees and conveyance fees;
- If the lender didn’t offer you advice to make some, if not all interest repayments over your lifetime mortgage plan;
- If the company didn’t also advise you have the option of releasing smaller amounts of cash, not the lump sum amount
The list is exhaustive, but these are some of the chief points that cover a mis-sell. That’s why it’s imperative to understand equity release plans exhaustively before you take out an equity release plan. Make sure that you also seek independent professional help before you get an equity release company to offer you a scheme.
Whatever the reason, if you’re thinking of releasing equity from your home, you may have questions about how it will impact you.
It’s vital to get the facts before making your decision. Consolidating debts over a longer period may mean you pay more overall, but your financial adviser will iron out such issues.
If you need to learn more about equity release plans, read on, and get to know how much equity you can release. Finally, be sure to find the perfect financial adviser to help you with your equity release journey.
Plans are regulated by the government’s Financial Conduct Authority, which means advisers and product providers are obliged to adhere to published standards in terms of their knowledge and the way they run their businesses.