Before deciding whether equity release is right for you, you need to know the facts, and that includes the question: is equity release safe?
Often people are worried that they could lose their homes, but equity release schemes from a member of the Equity Release Council guarantee you the right to remain in the property for the rest of your life, so long as you keep to the terms of the mortgage agreement.
The trade body, the Equity Release Council, has its own set of regulations to protect you from the potential risks of equity release. The Financial Conduct Authority also imposes regulations on the practice.
In the past, equity release schemes have not been held in the best regard. The authorities and regulations have been integral in improving the reputation of the industry, recognising the need to protect those most vulnerable from failed or fraudulent equity release schemes.
Who protects you?
The equity release industry started self-regulating in 1991. SHIP (Safe Home Income Plans) was formed, but the membership was just equity release providers. Now, the Equity Release Council is the main regulator, and its membership includes advisers, solicitors and lenders. In 2004, lifetime mortgages became fully regulated by the equivalent of today’s Financial Conduct Authority, and home reversion schemes were covered from 2007.
There are five key parties that work in the whole equity release process, each abiding by a statute of rules and principles. All of this should help you to answer the question is equity release safe?
The Financial Conduct Authority is the overseer of safe practices for the whole financial services industry, including lifetime mortgages and home reversions. All companies involved in these products are governed by the FCA. The Financial Ombudsman is also part of the FCA’s service to address customer complaints.
The Equity Release Council provides an industry set of principles which are the standard rules that advisers, lenders and solicitors voluntarily follow. The standards principles include safeguards like the ability to move house & transfer the equity release mortgage, no-negative equity guarantee and upper-capped variable interest rates.
Solicitors and licensed conveyancers, equity release advisers and equity release providers are the other three parties involved in equity release, and together they ensure that equity release schemes are as safe as possible.