5 reasons you should work with a mortgage broker who’s registered with the Equity Release Council
Equity release is an increasingly popular way to use your property to generate cash. There are two different types of equity release policy which you are eligible for when you’re over the age of 55 – a lifetime mortgage and a home reversion policy. You can take the cash as a lump sum or in smaller instalments (known as drawdowns).
The equity release Wild West of the 1980s
Until the 90’s when the Equity Release Council was set up (originally called ‘Safe Home Income Plans’ SHIP and then rebranded in 2012), equity release policies were relatively unregulated. This often led to unscrupulous practices and out-of-pocket customers which sometimes gave equity release a bad name (justifiably so in some cases) and this reputation has lingered. This is despite a continued effort over the past 30 years to evolve and improve the industry with tighter regulation.
Assurances for equity release customers
In contrast to the unregulated 1980s, the Equity Release Council now have rigid standards for companies who use the Equity Release Council brand. I am registered with the Equity Release Council which reassures my customers the policies I recommend will always adhere to their standards which are as follows:
1. A capped or fixed interest rate on your loan
The standards state “For lifetime mortgages the rate must be fixed for each release or, if variable, the rate must be capped for the life of the loan”.
This means you’ll be able to calculate exactly what you’ll owe, with no nasty surprises of interest rates going higher than you can afford to repay. Even with a variable rate, you’ll have the peace of mind that the rate won’t go higher than a certain amount.
2. The right to remain in your property
The standards state “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”.
This means only in very extreme circumstances would you need to move from your home unless you choose to. Generally, as long as you continue to look after the property, don’t sub-let it to anyone and inform your lender if anyone moves in with you, your property remains your home (even if you don’t have full ownership of it).
We’ve written more detail about this in our other blog called “Do I risk losing my home if I take out an equity release scheme?”
3. The right to move to another property
The standards state that “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 equity release loan.”
This means you’re not tied to the property you’re living in when you take out the equity release policy. So, if you want to move closer to family or to a property that better suits your needs, you can. You just need to ensure that your new home still fits the lending criteria in your policy.
We’ve written more detail about this in our other blog called “Do I risk losing my home if I take out an equity release scheme?”
4. No negative equity guarantee
The standards state “The product must have a “no negative equity guarantee”. 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”
This means you don’t need to worry about your loved ones having an unaffordable debt when you die or move into care. You will never owe more than your property is worth.
5. The right to make penalty free payments
The standards state “All customers taking out new plans which meet the Council’s standards must have the right to make penalty-free payments, subject to lending criteria”
This means you have control over how much your debt rolls up. You have the option to reduce the compound interest accrual by making lump sum payments, regular interest payments or overpayments on your loan. There can be limitations on the number of payments you can make, subject to the lender’s criteria.
How our team can help you with equity release
I set up Downton Mortgages & Financial Services to give people confidence in their financial decisions. We do that by making your policy options clear and easy to understand. There are no silly questions, and we are on hand to help every step of the way from research through to application.
I’m one of only a handful of mortgage brokers in the Bishop’s Stortford area who is registered with the Equity Release Council. When you work with us for equity release you can have maximum assurance that you are getting gold standard advice.
For more information about our Equity Release services, please take a look at our website or get in touch to arrange a no obligation discussion over the phone.
Other blogs we’ve written on the topic of equity release
- 5 things to do when you’re considering equity release
- How equity release can help you ride the cost of living crisis
- What do you need from a lifetime mortgage?
- Do I risk losing my home if I take out an equity release mortgage?
Other resources you might find helpful
The information contained within was correct at the time of publication but is subject to change (December 2024).
Please note for all mortgage products, terms and conditions apply. This information is a summary only. You will receive full documentation upon application which sets out the terms, conditions and limitations of lending provided.
A Lifetime Mortgage will reduce the value of your estate and may affect your entitlement to means-tested benefits and tax status. The impact of not servicing monthly interest payments on a Lifetime Mortgage is that the outstanding debt can grow rapidly, thus reducing the value of your estate.
For example, if the interest rate was 7% a year, a £50,000 loan would double to £100,000 after 10 years assuming no repayments are made.
This is an example for illustrative purposes only and personalised advice and recommendations should be sought from a qualified professional.
You are strongly advised to register a lasting power of attorney. This will allow your affairs to be managed by somebody else if your mental abilities significantly decline.
Your home may be repossessed if you do not keep up repayments on your mortgage.