Yes, equity release is a very safe financial product and customers can be rest assured knowing that the industry is regulated by the Financial Conduct Authority.
Last year, over 37,000 equity release schemes were approved helping homeowners over the age of 55 to access money that was tied up in their home.
At Equity Release Online, we are a regulated and authorised broker for equity release products in the UK. Below, we explain why equity release is a safe product to use.
Recently, the equity release industry became regulated by the Financial Conduct Authority, the City watchdog. All advisers, brokers and lenders in the sector must therefore have permissions and authorisations to offer advice or finance any equity release deals.
From a customer’s perspective, you have peace of mind knowing that any regulated company has been through rigorous checks to ensure that they are fit to offer their services and there are laws in place to protect customers. Any companies that do not follow the regulated guidelines will face hefty fines or closure.
The equity release sector is further governed by the Equity Release Council to provide extra protection to consumers. The guidelines enforced by the Council include:
Customers must be able to stay in their homes – Any customer that uses equity release, must be able to stay in their until their die or go into long term care. A customer will always be able to keep their home and never be homeless as a result of an equity release product.
No negative equity guarantee – This is an important ruling in place which means that borrowers will never repay more than the value of their home. Any customer will pay the interest outlined in their agreement, but it will never be more than the home value.
Even if the house value depreciates enormously and selling it does not cover your outstanding debt – the equity release provider will write this off. So your loved ones will never be left with any debt on their shoulders when you pass or go into care.
Get financial advice – As part of offering an equity release mortgage, the provider must also give you financial advice to help you get the best possible outcome.
One of the main benefits of equity release is that you get to stay in your home until you die or go into care. Even if your spouse lives longer than you, you will still be able to remain in the home or flat, as it is based on the last surviving homeowner.
Losing your home can be one of the biggest potential worries, especially as you enter your later years. But an essential rule of equity release is that you will always stay in your home.
Equity release mortgages are portable so if you want to downsize or move into another property, you can take your plan with you. The terms may be adjusted slightly and the lender may need to check that the property is adequate (not deteriorating) – but just because you have released cash from your last home does not mean that you are tied down. You can move any time you wish.
With equity release plans, you can still leave money aside as inheritance for your children. With lifetime mortgages, you still benefit from the property going up in value and any gains over the years will be available to your children when the property is eventually re-sold. This is not always the case with home reversion plans since you are essentially selling off part of your home.
With certain equity release schemes, you can specify about putting money aside for inheritance – so that there is a guaranteed amount left for your children.
There is also a way to give money to your children before you die. By receiving a large sum upfront through equity release, you are able to pass on some of your income to your children for a new home, car or to help with school fees.
Before proceeding with any equity release product, you will always get any documentations checked by your own independent solicitor. This means that you can get a second opinion over whether it is right for you and how to ensure that it is in your best interests.
Many equity release companies have employees who are ex-mortgage advisors or have been trained to give professional financial advice. Not only will you be applying for equity release online, but also getting some sound advice to benefit you and your financial future.
Equity release can be a good source of income if you are over the age of 55 or retired and looking to supplement your income.
You will lose a bit of equity in your home, but the ability to receive a huge lump sum can be life changing and allow you to enjoy your later years with the ones you love.