A Quick Look at Equity Release
Equity release refers to your property’s items/parts that lets you access your money tied up in your house. However, you can only gain access once you’re 55 years or older. You can get the capital value of objects in your home as a lump sum or an income based on the house’s value. You’ll just need to repay that money you accessed at a later stage. There are 2 types:
#1. Lifetime Mortgage
The first type of equity release is a lifetime mortgage. This type lets you take out a mortgage on your home if it’s your primary residence. However, you will remain the owner. You’ll have the option to ringfence part of your property for your family to inherit. You can also make repayments or let the interest increase. Better yet, if there’s any loan amount or any accrued interest, it’ll be paid back when you pass away or need long-term medical care.
#2. Home Reversion
The second type is a home reversion, which means you sell some of your property or your whole property. You can sell it to someone like a home reversion provider, and they’ll pay you a lump sum for it, but they can also pay you in regular payments. It’s your choice.
Now, you might be wondering, and why do I need them?
Who Are the Equity Release Council?
The Equity Release Council is a self-regulated non-profit organisation that safeguards the interests of homeowners. They specialise in all things equity release-related. It was initially recognised as Safe Home Income Plans, or SHIP until it was re-launched in 2012 when it broadened its reach from equity release providers to financial advisers. Its roles include:
- Offering you all the information you might require on equity release and its products.
- They are protecting you, the consumer using or considering taking out an equity release.
- They are raising awareness on how equity release might be an ideal option after retirement.
- Representing over 180 member firms and more than 500 people in the equity release industry, from financial advisers and lenders to representatives and surveyors.
So why do I need the council to do that for me?
The Council Helps You Avoid Sour Providers
The Equity Release Council is there to help you recognize the equity release companies to avoid:
- Plan providers who don’t have a ‘no negative equity guarantee.’
- Lenders who aren’t members of the ERC.
- Providers who charge high interest rates.
- Lenders who charge you very high repayments and who charge them early.
- Equity release firms that give you large loan amounts before they even analyse your circumstances.
Are You Considering Equity Release?
What’s Their Code of Conduct?
Its members also have to abide by a strict code of conduct:
- Loanee has a right to remain in the habitation or property for life until they pass away.
- Loanee will be offered clear, concise paperwork that includes all setup bills and residence values changes to ensure no confusion occurs.
- The consumer’s representative preference steers any legal work. Then he signs a certificate stating that the plan has been clarified and its clients comprehend the risks.
- The client can move their plan to another property without penalties.
- Equity Release Certificate defines the cost to the client’s asset and estate.
- Equity Release carries a “NO NEGATIVE EQUITY GUARANTEE.”
Now, let’s look at a no negative equity guarantee…
What’s a “No Negative Equity Guarantee?”
This guarantee protects you so that you don’t pay more than you owe to your equity release provider. However, when your lifetime mortgage plan comes to an end, the lender will sell your house and settle the loan amount plus any interest.
But let me tell you something:
If the estate market value decreases and the money can’t repay your mortgage, the lender won’t request more cash from your estate or heirs. Since you’ll be protected by the ‘no negative equity guarantee’, they aren’t legalised to do so. Therefore, consider the equity release company that will offer you this protection.
Common Questions People Ask Us
The Equity Release Council is a trade body that regulates equity release schemes in the UK. It was established in 1991, and it helps create a secure environment for equity release consumers.
The ERC works with the UK government to assist in making equity release products mainstream. They also work to change the overall clientele outlook on the equity release market.
Some of the ERC codes and principles include:
- When it comes to the lifetime mortgages, the interest rates should be fixed, or if they’re variable, there should be a cap (upper limit) that’s set for the life of the mortgage
- You have the right to continue residing in your home until the loan term ends, as long as the estate is your primary residence and you heed to the terms and conditions stipulated
- You have the right to move to another house as long as the new estate is acceptable to your plan provider
- All equity release providers should offer you the ‘no negative guarantee’ that protects you from paying more than the value of your home.
Well, the ERC is responsible for various tasks, and some of these include:
- Providing you with the information you need on equity release schemes and its options
- Safeguarding the consumer that uses and consider taking out an equity release scheme
- Raising awareness on how equity release might be an excellent choice after you go on retirement
- Representing more than 200 member companies and over 1,000 persons subscribing to the equity release products, financial advisors, lenders and even surveyors and their representatives.
Finances are always a bit daunting and tricky. But thanks to the Equity release council, your worries can be a bit less when it comes to equity release. Releasing funds from your property can be scary, but the council will help to protect you and your heirs from spending too much money on interest and losing money that you shouldn’t be losing.
Their code of conduct and rules help you to find the right equity release provider that won’t do you in. Ultimately, you don’t need to be anxious thinking about “Is equity release safe?“. It’s so much more improved than in previous years. You have all the information you need at your fingertips so that you can be at peace.
How Much Can You Release?
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