The term "equity release", when used in the UK financial services context, is given to a range of products aimed at older consumers who need or want to release value from assets (equity) tied up in the value of their homes.
There are two types of equity release products: lifetime mortgages and home reversions. This fact file explains how the schemes work and provides examples to illustrate typical features.
There is a range of providers active in the UK, which can be split into three basic types: mortgage lenders, insurance companies and specialist firms. However, compared to, say, the residential mortgage market, the number of firms involved is small. This is due to funding issues and the long-term nature of achieving a return on investment in equity release. The trade body Equity Release Council plays an important role in the sector.
In terms of regulation, equity release lending, arranging, advice and administration are activities supervised by the Financial Conduct Authority. Home reversions came under statutory regulation in April 2007, lifetime mortgages in October 2004. Equity release is deemed "higher risk" by the regulator, and therefore subject to additional rules and scrutiny.
There is a potential for both mis-selling and mis-buying in the equity release market. Advice - both financial advice and independent legal advice - is therefore essential for consumers considering entering into an equity release arrangement.
As well as the obvious impact on inheritance, equity release may impact on an individual's tax status and eligibility for benefits and grants. All are therefore very important considerations for customers and advisers.
According to the Equity Release Council (ERC) figures published in July 2018, homeowners released £971million from their homes between April and June alone, that’s almost £1bn in a single quarter.
If you are thinking of taking out an equity release plan then you need to find out as much as you can about your options and weigh up the advantages and disadvantages fully before you decide if equity release is right for you. As fully qualified financial advisers, we can help you to understand the steps involved and talk you through your options, the effects this might have on state benefits and tax and your obligations. And of course we can also explain the full benefits of equity release. Done correctly, equity release should have no impact on an individual’s tax position or their state benefits; however each individual’s circumstances need to be assessed.
Part of a customer’s choice will be over the type of plan required. In the modern equity release market there are a range of products to choose from, with new and innovative products being created regularly. This means that whatever your equity release needs, there is likely to be an equity release plan available to meet them.
THIS IS A LIFETIME MORTGAGE TO UNDERSTAND THE FEATURES AND RISKS, ASK FOR A PERSONALISED ILLUSTRATION
Active Financial Partners Ltd are not authorised to give advice on Home Reversion Schemes
Independant Financial Advisor
T: 01795 477744
M: 07886 516087