Equity release is a big financial commitment, and not something you want to enter into lightly.
In fact, the financial regulator the Financial Conduct Authority (FCA) requires homeowners to seek professional advice from an advisor with a specialist equity release qualification before they can unlock any of their property wealth. Here are a few resources that can help you get started.
If you’re looking for somewhere to start, you can get expert advice from an independent equity release specialist with Unbiased. They’ll listen to your needs and talk you through your options, so you can decide if equity release is the right option for you.
How does equity release work?
There are two main types of equity release scheme, lifetime mortgages, which are the most popular kind, and home reversion plans. Both enable you to release some of the wealth tied up in your home without having to leave it.
With a lifetime mortgage, you essentially take out a loan secured against your home but you do not normally need to make any repayments until you die or move into long-term care. Learn more about how lifetime mortgages work in our guide Lifetime mortgages explained.
Home reversion schemes work in a different way, as you sell all or part of your house but continue to live in it rent- free until you die or move into long-term care. Read more about home reversion schemes in our article Home reversion – what is it and how does it work?
Equity release products can be complex, so it’s vital to understand all the ins and outs first. Find out more in our article Equity release – what is it and how does it work?
How safe is equity release?
One of the biggest misconceptions surrounding equity release is that it’s unregulated, and therefore unsafe. In fact, there are significant consumer protections in place, and the equity release market is covered by the Financial Services Compensation Scheme (FSCS), which offers consumers protection if something goes wrong with the financial services and products they’ve taken out. Find out more in our guide Is equity release safe?
However, it’s important to remember that there are downsides that must be considered before deciding whether it’s the right option for you, which is why advice is so important.
An advisor’s role is to check you’re eligible for equity release, and to assess whether or not it’s suitable for you, based on your individual circumstances.
They must explain all the pros and cons of equity release, so that you’re fully aware of all the costs involved, what the tax implications are, and what will happen if you want to move house after releasing equity from your home.
How do I find an equity release advisor?
If you’re looking for somewhere to start, you can get expert advice from an independent equity release specialist with Unbiased. They’ll listen to your needs and talk you through your options, so you can decide if equity release is the right option for you.
The ERC stands for the Equity Release Council (ERC), which is the trade body for the equity release sector. The Council holds its members, which include equity release providers, advisors and solicitors, to high standards of professionalism to ensure that equity release products are as reliable for customers as possible, and that customers are fully informed of all the potential benefits, risks and downsides before they take out a plan.
One of the benefits of finding an advisor through the ERC is that it lays out specific rules and guidance for each of the services it offers. For advisors, some of the rules are:
- Advisors need to be familiar with Financial Conduct Authority (FCA) rules and adhere to them at all times.
- Advisors need to be familiar with Financial Conduct Authority (FCA) rules and adhere to them at all times.
- Advisors need to make sure that the customer is aware of all of the risks, features and benefits of a particular product.
- Advisors need to consider the customer’s physical and mental health when suggesting a suitable plan, and seek an opinion from a medical expert if necessary.
- In the case of a joint application, advisors need to speak to both parties and make sure they both have a voice in the process, and that both understand all relevant information.
Chris Pond, Chair of the Standards Board at the Equity Release Council, said: “Allowing people to access some of the savings built up in the value of their homes could help fill the increasing gap in retirement incomes and long-term care costs, but people must have confidence that they will be treated fairly if they consider this option, which is why the maintenance of the highest standards of consumer protection is so essential.”
Do I need a solicitor for equity release?
Yes, and you can choose your own solicitor to carry out the legal work required to set your plan up if you want to. Your advisor will provide them with full details of the plan, including the rights and obligations of both you and your equity release provider under the contract, if you decide to proceed. Both you and your solicitor will be required to sign a certificate confirming that these rights and obligations have been explained to you and that you wish to enter into the plan.
If you’re looking for a solicitor, you can find one either through Equity Release Council, or the Law Society’s free Find a solicitor service. Make sure you check reviews for the solicitor you’re planning to use, so you can see how other people have rated their service.
If you need a more general introduction to equity release or just want to learn more about it, our equity release section contains articles on all aspects of equity release, including eligibility guides, the risks of equity release and possible alternatives that you might want to consider.
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