Equity release is regulated by the Financial Conduct Authority (FCA). If you would like to look at taking out an equity release plan, your first step will be to receive advice from a professionally qualified and regulated adviser. He or she will help you to understand your circumstances, explain the pros and cons of taking out equity release. If you both decide that equity release is suitable for you, the adviser will then recommend a suitable product.
We would highly recommend that you choose an adviser who is a member of the Equity Release Council, who has committed to uphold the high standards we expect of them. Our adviser members are required to cover a number of important issues with you to help you reach a decision.
Based on these discussions, your adviser will recommend a product for you. Our rules require him or her to give you a written suitability report which explains why he or she believes that equity release is suitable for you and why the particular product being recommended suits your individual circumstances.
Your adviser is also required, according to the Mortgage Rules laid down by the FCA, to give you a Key Facts Illustration (KFI) before you make a formal application for a lifetime mortgage. The KFI sets out the details of the plan which you are considering applying for, and includes details of the costs and risks associated with it. If you are considering more than one option, you must be given a separate KFI for each plan so you can compare and contrast the costs and details associated with each.
(If you wish to or are recommended to take out a home reversion plan, instead of a ‘KFI’ you must be given a ‘home reversion plan illustration’ which will set out the key facts about the proposed reversion plan, and how it will work.)
If equity release is recommended for you and you decide to go ahead, your adviser will help you to complete an application. If the plan provider accepts your application, you will then receive a formal offer from them which your adviser will explain to you.
These documents set out the full details of the product you are taking out, including the risks involved and a section titled ‘What will you owe and when?’. This includes a table showing how interest will be applied to the loan, so you can see how the total cost grows over time if you have opted for a rolled-up interest lifetime mortgage.
These documents also explain that if you decide to repay your loan early, you may be required to pay the provider an ‘early repayment charge’. The explanation will set out whether a charge will apply to your plan, how the charge is calculated and, although the provider will not be able to anticipate the exact amount that may apply at some future date, it must state, in cash terms, the maximum amount that you might be expected to pay.
Exploring equity release through one of our members also guarantees you independent legal advice from a solicitor of your choice before you confirm your final decision. The solicitor will meet with you face to face and also normally prepare a written report, which sets out the risks and rewards of equity release, together with your contractual obligations with regard to the product offer you have received from the provider. The solicitor is required to verify that you understand the terms of the contract and whether or not you would like to proceed.
Use our online member directory to find an Equity Release Council member in your area who can help with any enquiries.
Once you have decided that you want to know more about equity release, you should set up a meeting with a financial adviser or you may contact them for an informal telephone conversation. Your adviser will review your personal circumstances to check if an equity release plan is the most suitable option for you, taking into account other sources of funding that you may have including any state benefit entitlements. This is a specialist area of advice. For that matter, you should always source an adviser who holds the necessary qualifications and permissions to give this advice and who is a member of the Equity Release Council to ensure you receive all the relevant information and guidance and you are protected by the additional safeguards offered by The Council's members. You can find a list of specialist advisers who are members of The Equity Release Council in the “adviser” section of the member directory on our website (www.equityreleasecouncil.com/member-directory/). You have the choice of both telephone and face-to-face advice services.
Once your adviser has assessed your circumstances, they will provide you with some recommendations and a personal Key Facts Illustration and the Initial Disclosure Document. This summarises all the important details and costs involved in taking out your plan. You may wish to involve your family and discuss your plans and this information. Advisers who are members of the Equity Release Council fully support and encourage the involvement of family members throughout the process if you so wish.
If you are happy with the proposed product then you will need to complete an application form. Your adviser will help you do this and then send the form, together with any fees payable up front, to the provider.
You will also need to appoint a solicitor to carry out the necessary legal work to complete your contract with the equity release provider. It is advisable to make sure that the solicitor you choose is familiar with equity release products and has experience in advising clients on the details of equity release plans and the associated property conveyancing, as this will keep the costs to a minimum and ensure a smooth process. You can find a list of specialist solicitors who are members of the Equity Release Council in the “solicitor” section of the member directory on our website (www.equityreleasecouncil.com/member-directory/).
The plan provider will need to have a valuation of your home and will instruct a RICS-qualified surveyor to visit your property in order to assess its value. A copy of the surveyor’s report will be sent to you and/or to your solicitor.
Once the survey is complete and the amount you can borrow has been confirmed, you and your solicitor will receive an Offer Letter. Your solicitor will usually prepare a written report explaining the obligations and benefits of going ahead with the plan. Our (The Equity Release Council's) rules require that you should have at least one face-to-face meeting, either with a solicitor from the firm which prepared the written report for you, or with another qualified solicitor acting on behalf of the firm which prepared the report. The purpose of this meeting is to make sure that you have the opportunity to ask as many questions as you need so that you are confident you understand the details of the contract you are proposing to sign. The solicitor will also make sure that you understand the nature of the legal contract which you are committing yourself to, and confirm that you are not being pressurised to sign something that you don’t understand or don’t want to sign up to. The solicitor will also check that where you are entering into the contract with a spouse or partner, you both agree to do so. When you are ready, you and your solicitor will sign the acceptance form and an Equity Release Council Solicitor’s Certificate which confirms that all key points have been discussed.
Your provider will then carry out some legal checks in relation to the title of your property. Once this is completed, the money will be released to your solicitor who will arrange for it to be transferred to you.
You should always seek professional advice. It is important to explore all the options that could meet your financial needs before choosing an equity release plan. Doing some research will also help when you come to speak to an adviser. Please see FAQ below on the standard process for taking out an equity release plan.
You can find information from the Financial Conduct Authority which issues a useful guide – A Guide to Unlocking the Wealth in Your Home.
You can also get information from individual Equity Release Council members or from other qualified advisory firms.
The Equity Release Council membership includes qualified Financial Advisers and you can find their contact details on the Equity Release Council members’ directory (http://www.equityreleasecouncil.com/member-directory/).
You will receive a copy of your mortgage offer, together with the terms and conditions, directly from the lender. Your solicitor will receive a copy from the lender’s solicitor. The lender has its own solicitor, entirely independent of yours, to ensure that your interests are separately represented.
Your solicitor will usually prepare a written report, setting out the risks, rewards and legal obligations of the plan that has been recommended to you. It is useful to have this in writing so that you can refer to it in future.
You will need to sign the offer documents in the presence of a solicitor. There are several ways of doing this. You can visit your solicitor’s office. However, if your solicitor is not local to you, they may appoint somebody to witness the paperwork on their behalf. An additional fee may apply for this, but you should have been advised about this at the outset. Once you have signed the paperwork, all of this should be sent back to your solicitor immediately, otherwise a delay will occur.
Your solicitor will want to see you on your own, at least in the first instance, to ensure that you understand the plan that you are entering into and that nobody is pressuring you to release money. It is certainly possible for family members to come in later, if you want to discuss your affairs openly with them.
Your solicitor will prepare a bundle, including your signed equity release paperwork, for the lender’s solicitor. The contents of this bundle vary from lender to lender, which is why it is important that your solicitor is familiar with equity release products. The lender’s solicitor will review the bundle and, if everything is in order, will set a date to complete your equity release. Please note that the completion date is not within the control of your own solicitor so you should not commit the funds until your solicitor has been advised when your equity release is going to complete.
If everything is straightforward, this should be within a week or two, provided your solicitor has sent the bundle of signed documents to the lender’s solicitor upon receipt. If there are ongoing legal issues (e.g., your title deeds are not in order), there may be a delay but your solicitor should keep you informed throughout. Either way, you are strongly advised not to commit to spending the proceeds of the equity release until such time as your solicitor has been able to confirm when completion will take place.