What is Equity Release

Nigel Waterson gives us the lowdown

Equity Release provides home-owners over the age of 55 with the facility to release money from their home, which they live in as their main residence, without necessarily making regular repayments, whilst allowing them to live in it for as long as they want. There are two main types of equity release: Lifetime Mortgages and Home Reversion plans. Both are regulated by the Financial Conduct Authority. By using an equity release product, you can draw a lump sum or regular smaller sums (known as “drawdown”) from the value of your home.

What are the product standards set by the Equity Release Council, and why you should always deal with our member professionals?

The Equity Release Council (The Council), which is celebrating its 25th anniversary this year, was set up as a voluntary effort from its members to safeguard consumers. It is also the 25th anniversary of our Standards.

The Council requires equity release transactions to be supported with three levels of protection: a structured financial advice process, face-to-face legal advice and product safeguards, while specific standards are further explained below:

• For lifetime mortgages, interest rates must be fixed or, if they are variable, there must be a “cap” (upper limit) fixed.

• You must have the right to remain in your property for life or until you need to move into long-term care, provided the property remains your main residence and you abide by the terms and conditions of your contract.

• You have the right to move to another property subject to the new property being acceptable to your product provider as continuing security for your loan.

• The product must have a “no negative equity guarantee”. This means that when your property is sold, and agents’ and solicitors’ fees have been paid, even if the amount left is not enough to repay the outstanding loan to your provider, neither you nor your estate will be liable to pay any more.

Our members are only allowed to tell you that a product meets these standards if it meets all of them. If you are offered, or are considering, a product that does not meet all of the standards, the product literature must explain which standards are not met, and illustrate the types of risk that this might pose for you. So you are well advised to always go to a member of The Council.

Nigel Waterson is Chairman of the Equity Release Council