Regulatory Requirements for Equity Release Advisers

Finding an independent financial adviser seems to be an easy task with the numerous providers offering these services. The financial advisers authorised and regulated by the Financial Services Authority (FSA) must follow a certain procedure. Make sure the financial adviser you choose adheres to the key regulatory requirements set by FSA.

The independent financial advisers must provide an initial disclosure document when they meet you for the first time. Combining equity release advice with standard mortgage advice is not acceptable. Also, make sure the fees are detailed out in this document.

The advisers must collect every detail about your financial situation and assess these details to support the recommendation they make for you. They must also explain the reasons behind their recommendations.

They must ensure that releasing equity from your home is the right way of arranging the money you need. They must provide an overview of all types of equity release schemes available and help you make the appropriate choice.

The advisers must provide a detailed guide about the advantages and risks associated with equity release. These schemes may affect your means-tested benefits and your tax position. They should recommend this solution only if the positives outweigh the negatives.

The financial advisers must look for alternative financial solutions before they recommend equity release. For examples, if you need the money for house repairs, they may advise you to contact the local authority for a grant.

They should also check other solutions if your objective is debt consolidation. Sometimes, getting an increase in the repayment period or getting security on an unsecured loan may be more appropriate than equity release.

They must help you assess whether monthly payments will be possible. If your financial situation permits this, they may recommend a scheme that lets you pay the monthly interest, which limits the amount you owe.

They need to consider the future plans you have. If you plan to move, or if your health makes it necessary to move, in the future, the advisers must recommend plans for equity release that provide this opportunity.

The financial advisers need to focus on your age, health and life expectancy before they make any recommendations. They will need these details to use the equity release calculator to find out the amount you may release from your home.

They must consult you about your preferences regarding your estate before recommending a product. With their expertise, they will be able to find out schemes that provide you the opportunity to leave behind an inheritance.

The advisers must take into account the rights the home reversion scheme provides for the homeowners before they recommend it to you. Along with this, they must also assess whether it corresponds to your objectives, requirements and circumstances.

Equity release provides an opportunity for retired individuals to utilise the value locked up in their homes for a comfortable and secured life. However, it has a number of financial risks associated with it. When you get advice and guidance from a competent financial adviser, you will be able to make an informed decision in this regard.

How Do Equity Release Mortgages Work?

Now that mortgage providers are asking for such high deposits, the price of even the smallest starter home is now out of the reach of many first time buyers. That, plus the fact that house prices are now on the increase again, means that more and more parents are looking to equity release mortgages to provide the cash to give their children a helping hand onto the property market. If you are looking for a way to get your hands on the equity that is tied up in your home, here are the facts that you need to know.

What is an equity release mortgage?

An equity release mortgage unlocks the value that you have tied up in your property and turns it into cash, which can be used for any purpose you choose. Such arrangements are available to homeowners who are age 55 or over and they usually require no monthly repayment, they are repaid from the proceeds of the eventual sale of the property.

Why would you need to use an equity release mortgage?

Over the years, the price of houses has risen fairly steadily, which has led to many older people finding themselves in the situation of having money tied up in their property, but still being unable to afford to help their children buy a property or even pay for their own health care. An equity release plan enables them to realise that cash, but does not require them to move out of their home.

What types of plans are available?

Different providers offer different types of schemes and the main types are as follows. There are home reversion plans, where you sell the property, but you still have the right to live in it. Drawdown lifetime mortgages are schemes where you retain ownership of the property and borrow against the value of the property when you need to and, a simple lifetime mortgage, is one where you drawdown all the equity value in one go. In all cases, the value of the loan, plus the interest, is repaid when the property is sold.

Are there any downsides to equity release mortgages?

Equity release plans used to have a bad reputation because people didn’t really understand what they were signing up for. Today, however, they are properly regulated and the terms are well documented by lenders. When you take out a mortgage release plan, you are borrowing money and there will be fees and interest payable. That means that are reducing the amount of money that your family will inherit and the family home will be sold to repay the loan. You should also make sure that any money you receive will not impact on your state benefit payments.

How do you find the best equity release mortgage for you?

As is the case with any type of mortgage, each lender has their own particular schemes with different terms, different fees and interest rates, and different degrees of flexibility. Most schemes will still be available to you even if you are not in the best of health and with many, you can still move home if you wish to. The best thing to do is talk to a financial advisor, tell them about your circumstances and your requirements, and they will be able to recommend the best equity release plan for you.