Is Equity Release Safe?

The facts and the myths.

Is Equity Release Safe?

The facts and the myths.

Is Equity Release Safe?

The facts and the myths.

Is Equity Release Safe?

The facts and the myths.

Is Equity Release Safe?

The facts and the myths.

The Guarantees

The Equity Release Council (ERC) is an independent body that provides a further layer of protection over and above that provided by the Financial Conduct Authority (FCA). All the plans I recommend are backed by the ERC and have the following guarantees as standard.

  • The right to stay in your home for life.
  • The right to move home if you want to.
  • A no negative equity guarantee.
  • The right to make payments.

The right to stay in your home for life
Let’s be clear, with a lifetime mortgage you don’t sell your home. You remain the owner, just as you did if you had a mortgage earlier in your life. The lender, or provider, takes a first legal charge over the property. The lifetime mortgage comes to a natural conclusion when your home becomes empty on the event of the second person (if a joint application) going into long term care or passing away. At this point, your beneficiaries would sell the property and repay the outstanding balance. Or it could be bought by a family member and the loan repaid in that way. Any surplus proceeds go back to your estate for distribution as per your will instructions.

The right to move if you want to
You can move home in the future and take the existing mortgage to your new home. However, the amount outstanding must “fit” within the new property value, and the new property must be acceptable to your lender as security.

No Negative Equity Guarantee
Simply put, you never leave a debt for your beneficiaries to pay. When the property is sold, if there’s insufficient value in your home to repay the mortgage in full, the lender absorbs the difference.

The right to make payments

From March 2022 all pans supported by the Equity Release Council must include the ability to make repayments but only if you want to, they are not compulsory. Plans typically allow up to 10% of the original amount borrowed to be repaid every year without early repayment charges (ERCs). This feature can take away the worry of interest compounding over the years and makes Lifetime Mortgages very flexible.

The ERC states you must take independent legal advice when applying for a Lifetime Mortgage. You can absolutely choose a family solicitor from the high street however, I would always recommend you use a specialist independent firm that deals with equity release transactions every day of the week. You would benefit from: 

  • A fixed price from the outset.
  • A home visit to complete the paperwork, confirm ID and have your signatures formally witnessed.
  • If you decide not to proceed, no completion no fee. (You would only have to pay for any disbursements incurred).

At the home visit, the solicitor signs a certificate confirming they are satisfied that you are fully aware of the commitment you are making, that you have the mental capacity to make such decisions and that you are not under any pressure that might be making you act against your will.

Generally, cases handled by specialist firms complete more quickly because they know what to expect and are aware of common pitfalls! With all the regulation in place and the independent legal advice you can be sure you’re in good hands.

For further information about the ERC, please visit their website: Equity Release Council