Feeling safe in your retirement is a top priority for many people. With the cost of living on the rise, it’s important to find out what you can do to help protect yourself and your family from any unforeseen circumstances.
As a result of this, more and more people over the age of 55 are turning to various equity release products as a means to fund their retirement.
One question that many consumers are asking themselves is which type of adviser they should work with when considering these types of products: independent advisers or direct providers?
What are Independent Advisers?
Independent advisers are often a cheaper option as they don’t charge for their services and you only pay the interest on borrowing money but, it is a gamble that can be difficult if not impossible to undo.
There’s no guarantee with this type of provider that there will always be someone available when you need them which may lead to costly consequences down the line without any protection or insurance cover.
On top of this, these providers do not offer fixed rates and so it can become expensive if rates rise before your loan has been repaid through some lenders that have recently stepped in.
What are Direct Providers?
Direct providers, on the other hand, are flexible and offer fixed rates. Customers can choose their loan size as well as when they want to make repayments which makes it a much more attractive option than independent advisers.
Although of course, you do have to pay for these services. Direct providers also guarantee 24-hour customer service. If anything goes wrong with your repayment plan or you need financial advice in any area then there is always someone available to help.
In general, though, there are many reasons why direct providers have become a popular choice in recent years. Some people may think that it’s too expensive when considering their retirement security, but remember that although they do charge fees upfront these companies can also bring peace of mind.
8 Things You Want to Consider When Looking For an Equity Release Adviser
For those considering releasing some of the equity in their houses, getting proper equity release advice is essential.
Here are some criteria to look for in an equity release adviser:
Are They an FCA-Regulated Equity Release Adviser?
To begin, make that he or she is regulated by the Financial Conduct Authority1 and is qualified to provide equity release advice.
Are They Able to Offer Advice About the Entire Equity Release Market?
Check to see if the equity release adviser is a whole of market and independent adviser. This means they have access to all current equity release plans and aren’t limited to a small number of products or a few suppliers, ensuring you don’t miss out on a plan that could be appropriate for your needs.
Can They Provide a Face-to-Face Equity Release Consultation?
Make sure your equity release adviser can provide you with face-to-face assistance. Making the decision to release funds from your house is a big one, and it’s difficult to go over everything in depth over the phone.
In addition, during Covid times, you might want to also check if you offer virtual consultations.
Are They Willing to Include Your Family in the Advisery Process?
Make sure your adviser promotes your family’s participation and is willing to include them in your face-to-face meetings. It’s critical to discuss equity release with your family, and you should never be deterred from doing so.
Can They Give You a Free Initial Consultation With No Obligation?
A competent equity release expert will provide a free, initial no-obligation consultation, during which you can learn if you qualify for a lifetime mortgage or a home reversion plan, as well as how much money you could release.
Can They Help You Examine All Alternatives to Equity Release?
The greatest equity release advisers will always advise you on the equity release alternatives, such as grants, benefits, traditional loans, saving, and other options. They will only advise you to apply for a lifetime mortgage or a home reversion plan if it is the best option for you and your family.
Have They Garnered Any Awards in This Field?
If your adviser has earned an award for the quality of their guidance, you can rest assured that you are in good hands; look for award badges on their website or literature.
Are Their Plans Compliant to The Safe Home Income Plans (SHIP)?
Select an equity release adviser who only suggests SHIP-approved programs or those that offer the same assurances. You may rest assured that you will never lose your home or owe more than it is worth.
6 Questions You Should Ask Your Equity Release Adviser
How do you know whether you’re getting good financial advice and what to look for in an equity release adviser? Asking your adviser some questions and testing their knowledge in the equity release sector is a smart place to start.
1. Do You Provide Advice on All Types of Equity Release Options?
By asking this question, you should be able to determine whether they are affiliated with a certain lender or are providing recommendations based on the entire market.
The more lenders they work with and the more programs they offer, the less shopping around for the best bargain you’ll have to do!
2. What are the Expenses of an Equity Release Plan?
When considering an equity release strategy, there are several fees to consider from a variety of sources.
- A one-time valuation fee that is almost certainly non-refundable.
- An arrangement charge may be added to the loan amount, but it may also be subject to interest.
- Interest will be charged on a lifetime mortgage. The interest will roll-up if it is not serviced, which means the amount of interest charged will increase year after year.
- For an equity release plan to be set up, you must first get legal counsel from your solicitor.
Equity Release Adviser Fees
- A one-time cost that is almost certainly non-refundable.
- A completion fee is typically charged for advising and securing financing.
Learn all about: Equity Release Costs
3. Is the Equity Release Council Going to Protect Me?
It’s critical to know if any equity release plan your adviser advises complies with the Equity Release Council2 guidelines and, as a result, provides you with the following protections:
- Interest rates on lifetime mortgages must be fixed or have a cap that is fixed for the life of the loan if they are variable.
- You must have the right to live in your home for the rest of your life or until you need permanent care, as long as it is your primary residence and you follow the terms and conditions of your contract.
- You have the option to move to another property as long as the new property is acceptable to your equity release loan provider as continued security.
- A no negative equity guarantee3 must be included in the product. This implies that if the amount left over after paying the agents’ and solicitors’ fees isn’t enough to repay the outstanding debt to your supplier, neither you nor your estate will be obligated to pay any more.
4. How Do You Decide Which Plan is Best for You?
Your adviser should be able to explain their decision-making process for choosing the best plan for you. Essentially, this refers to what their offer is and how they want to serve you. It’s recommended that their advice be written down for you in a physical document known as a suitability report.
5. How Much Can I Borrow On an Rio?
RIO stands for Retirement Interest Only mortgage. These types of mortgages require mandatory monthly interest payments to be made. This differs with equity release in that instead of having a predetermined term when the capital must be repaid, they run until the final borrower dies or enters permanent long-term care.
Any certified equity release expert will be able to provide RIO advice as well. Find out whether yours is aware of them and if they are willing to provide them as part of their service.
6. How Do You Decide How Much Initial Advance and Reserve I Should Have?
The initial advance refers to money that you will receive right now. A reserve facility is a set amount of money that you can borrow from the lender in the future.
It’s ideal to just release enough money to cover any expenses you expect to have in the near future. Any funds you anticipate needing in the medium to long term should be put into a reserve account.
Why You Should Seek Equity Release Advice?
Here are five reasons why you should seek financial advice on equity release:
- There is a vast selection of things to choose from.
- Advice on equity release can help you save money.
- The price of releasing equity can be rather expensive.
- Keep your family’s inheritance safe.
- Equity release may not be suitable for you
How Much Does an Independent Financial Advisor Cost?
Your advisor’s costs may be determined by a variety of factors, including the scope of the advice you require, the amount of time it will take, and the value of the assets involved. In general, advisors charge between 1% and 2% of the asset in with lower percentages charged for larger assets.
Is There No Way to Release Equity by Going Direct?
To secure a scheme, you’ll need the help of an equity release advisor or broker. Some people wrongly feel that going direct will allow them to discharge equity. The companies, on the other hand, are prohibited by FCA laws from transacting directly with customers and will lead them to a suitable advisor.
How Much Do Equity Release Advisors Earn?
In the United Kingdom, the average equity release advisor compensation is £45,000 per year or £23.08 per hour. Starting salaries for entry-level employment start at £30,000 per year, with the highest-paid professionals earning up to £56,625 per year.
Equity release is a useful technique for releasing funds from your house in retirement. Some retirees want more funds to cover living expenses, while others use equity release to purchase a second house. In fact, the equity release uses are vast.
If you’re unsure about how to release equity from your property, go to a professional equity release specialist who can explain what equity release is and how it works, as well as walk you through the many possibilities.