Avoid becoming a fraud statistic by using a trusted equity release plan provider!
Over 16,500 UK retirees released equity from their homes in 2021. If you’re looking to join them, you must ensure that you know which equity release firms are on top and those to avoid.
We’ll guide you in discovering:
- The signs that indicate an equity release plan provider is regulated.
- The red flags to look out for, to avoid illegitimate lenders.
- Why it’s so important to release equity through a regulated plan provider.
While the equity release industry is the safest it’s ever been, you’ll always be at risk when it comes to any financial products. Luckily, we’ve done an in-depth analysis of the industry, looked at over 220 plans, and discovered all the details you need to know about releasing equity from a legitimate lender in 2021.
What’s Equity Release?
Equity release is the use of financial arrangements that provide the owner of a house or other property with funds derived from the value of the property while enabling them to continue using it.
Learn More: What Is Equity Release?
How Does Equity Release Work?
Simply put, an equity release is a UK product that allows you to unlock the cash tied into your home, with no payments required in your lifetime. Instead, the loan, plus interest, is repaid from the sale of your home when you pass away or move into permanent care.
Learn More: How Does Equity Release Work?
Equity Release Types
There are two equity release options available to you.
- Lifetime mortgage: is a mortgage secured on your property (provided it’s your main residence), while retaining ownership.
- Home reversion: is where you sell part or all of your home to a home reversion provider in return for a lump sum or regular payments. You have the right to continue living in the property until you die, but you have to agree to maintain and insure it.
Find out now!
4 Secrets to Identifying Which Equity Release Companies to Avoid
Before 1991, the equity release market was riddled with scandal as dubious lenders took advantage of UK’s elderly homeowners, some being left with crippling debt.
The Equity Release Council was formed to regulate the market and protect consumers releasing equity from their homes.
There are 4 secrets to identifying a legitimate equity release lender, and here they are!
1. They Must Be Registered With FCA and Be a Member of the Equity Release Council
The Financial Conduct Authority regulates the financial industry as a whole, while the Equity Release Council specifically oversees the equity release market.
Some of the rules set out by the ERC include:
- All plans need to have fixed or capped interest rates, limiting the amount of interest that can accumulate.
- Plan holders have the right to stay in their homes until they pass away or move into permanent care.
- Homeowners can relocate and transfer their plan to another home, as long as it meets the lender’s criteria.
- A ‘no negative equity guarantee’ ensuring that your family never owes more than the sale value of your home, when you die or are transferred to long-term care.
- Plans must have reasonable interest rates that are in line with industry standards.
- At the onset, you must be made aware of an early settlement fee structure.
Any regulated lender will be upfront about their Equity Release Council membership, which might even be visible on their website.
2. They’ll Be Upfront About Their Fee Structure
The equity release process will generally cost between £1,500 and £3,000, and your equity release provider will be upfront about these expenses.
These fees include:
- Advice fees
- Valuation fees
- Solicitor fees
- Application fees
It’s highly advised to shop around at various plan providers to see who has the best deal to suit your needs.
3. Early Repayment Charges Should Be Within a Normal Range
While equity release is intended to last until you pass away or move into long-term care, we never know where life can throw us curve balls.
If you would need to cancel your equity release plan due to unforeseen circumstances like immigration, you’ll likely have to fork out an early repayment charge.
This amount could be as much as 25% of the loan, but can differ from one plan to the next.
Some providers offer specials where you won’t need to worry about early repayment charges for the first 3 years of your equity release plan.
4. If It Sounds Too Good to Be True, It Probably Is
The equity release process generally takes 4-12 weeks, requires a solicitor, and, while pretty stress-free, it’s a detailed process.
Steer clear from any so-called equity release provider willing to give you an instant loan without checking your credentials. That’s almost definitely a scam!
Who Are The Equity Release Council?
The Equity Release Council is a governing body that oversees, regulates, and protects the equity release market. The council was formed in 1991 to combat bad practices within the industry.
Who Is The Best Equity Release Plan Provider?
You are in the best hands with any provider who’s a member of the Equity Release Council. Big names include Aviva and Legal & General, but the best provider for you will depend on your individual needs.
Whom Should I turn to For Equity Release Advice?
When starting your equity release journey, you should get in touch with an independent financial adviser. Look for a whole market adviser who has a strong understanding of the equity release landscape.
If done right, equity release can be a life-changing financial product for you and your family. By releasing equity from your home, you can have the means to stay put and live out your days stress-free.
Just ensure that you don’t get fooled by an illegitimate provider. The best way to do so is by ensuring they’re members of the Equity Release Council.