1. There’s been so much bad publicity, there must be something dodgy
Most of the bad publicity dates back to the 1980s. In 1991 the Equity Release providers established a trade body called SHIP which put into place important legal safeguards.
More recently Equity Release has become regulated by the Financial Services Authority (FSA) meaning all advisers have to be suitably qualified and have FSA permission in order to advise.
Yesteryear’s plans bear little comparison with the safe Equity Release of today.
2. I might lose my house
Not true, safety is one of the most important aspects of Equity Release. I quote SHIP guarantee number 1 - To allow customers to remain in their property for life provided the property remains their main residence.
3. It’s expensive
This is a matter of opinion but there is strong competition between the Equity Release providers which keeps costs down.
4. There goes the house; there will be nothing left for the children
Our experience is that, in the vast majority of cases, this simply isn’t true. We find that most people borrow much less than they could, meaning there should be plenty of equity left. There are also ways of guaranteeing a proportion of the property for your beneficiaries.
It must be said that it is possible to sell your home under a Home Reversion Plan and then there would be nothing left.
This is also be affected by how long you live and what happens in the future to house prices.
5. I won’t be able to move
One of the SHIP guarantees is that you will be able to move. However, it can get complicated and this is something you should discuss carefully with your adviser.
6. I won’t be able to pay it off
Lifetime Mortgages can be repaid at any time, however differing amounts of early repayment charge can apply.
If you are thinking of paying off a Lifetime Mortgage you should discuss this with your adviser so that a suitable plan is chosen.
7. If I take Equity Release I will lose my benefits
This is simply not true but if you are in receipt of means tested State Benefits, such as Pension Credit and Council Tax Benefit, it is important to tread carefully.
In most cases your adviser should be able to help you take Equity Release without impacting upon your benefits.
8. I will buy direct and cut out the middle man
We have seen insurance adverts telling us this. With Equity Release the opposite is often true. Unlike most other financial products Equity Release has to be an advised purchase. If the Equity Release company is advising you there are two pitfalls –
- They only advise on their own product. The chance of getting the best Equity Release plan for your needs is down to luck rather than judgement.
- Some lenders charge a higher interest rate to pay for their salesforce. The same plan can be arranged through an independent adviser at a lower interest rate.
9. What if interest rates go up?
Interest rates on all currently available Lifetime Mortgages are fixed for life.
With Home Reversion Plans, there is no interest charged.
10. I will wait until the housing market improves
If you need the maximum Equity Release then you may be affected by the fall in house prices. But as most people, according to our experience, require much less than the maximum available, they would not be affected.
By David Wright
Managing Director of Equity Release Specialists, Sixty Plus
david@sixtyplusonline.co.uk
www.sixtyplusonline.co.uk
