FAQs

No. The amount of money you borrow against the value of your home, plus any rolled-up interest, can never go above the value of the property – when it is sold at the end of your plan – due to the No Negative Equity Guarantee safeguard upheld by Equity Release Council members. You will continue benefitting from the rises in property value in the years to come.

With a lifetime mortgage, you will continue owning your home and with a home reversion plan, you would have to convey the deeds to the scheme provider – totally or up to an agreed percentage. Based on that, the scheme provider will own this part of your property. However, in both cases you will own a lifetime lease guaranteeing you the right to stay in your home until death or when you move into long-term care.

The main risk for borrowers who have traditional mortgages is that they find themselves unable to make their regular repayments – and if they get too far into debt the lender may decide to go to court to get an order to repossess the property.  The lender will then sell the property to recoup as much as possible of the money which it had lent to the borrower.  With most equity release schemes however, you the borrower are not required to make any regular repayments to the lender, so the question of not being able to afford to repay the loan simply does not apply.

It is rare for a lender to take possession under an equity release plan but as with every contract, failing to comply with the terms and conditions of an equity release plan, could mean that the house might be repossessed. For example, failing to keep the property in a good state of repair, and renting it out/ subletting a part of it are reasons why a contract could be considered breached on behalf of a borrower. We should emphasise that even if a contract is breached on the behalf of a customer, a lender would first give the borrower warning about what the borrower needed to put right.

It is true that instances of repossessions under equity release schemes have happened in previous decades when the product was unregulated. Nowadays, equity release is one of the most regulated financial products in the UK and both the regulator and the industry itself work to ensure, as much as possible, that there are no negative customer experiences. The industry aims to protect the good work that has taken place since then with regards to standards and its long-term reputation. In fact, the Equity Release Council is an organisation created exactly on this premise: to ensure your total peace of mind through their safety guarantees (please see FAQ on product standards).

Equity release products are among the most highly regulated financial services products in the UK. As well as formal regulation that is overseen by Government, Equity Release Council members also follow a strict set of consumer-focused industry standards, established in 1991, to ensure a safe and reliable market.

Regulations require firms to have sufficient resources to withstand significant economic shocks only expected once in 200 years, so it is highly unlikely a firm would fail. If a firm exited the market, steps would be taken to protect its existing customers’ interests. There have been examples where companies have stopped writing new business or left the market and another provider or third party has assumed responsibility for its customers. Alternatively a firm may cease to provide new lending but continue to provide services to its existing customers.

There can be no change to a regulated contract’s guaranteed terms as a result, including the interest rate customers signed up to. For Equity Release Council members, this includes safeguards such as the No Negative Equity Guarantee, a fixed or capped interest rate for life and the right to remain in the property for life or until they need to move into long-term care.

Any elements of a contract that are not guaranteed which can include additional borrowing do not have to transfer to a new lender as some firms in these situations may not provide additional lending facilities. While any existing customer can seek advice about the option to re-mortgage to another product or provider, in circumstances such as a firm going into liquidation there have been examples when existing mortgage loan books have been sold to new providers and customers have had any early repayment charges (ERCs) waived to help them move.

The Council’s full complaint process can be found on our website here (insert weblink)

The Equity Release Council is a voluntary trade body to which advisers, providers, solicitors and other professionals in this market can belong. We are not the regulator (this is the Financial Conduct Authority), nor do we have any enforcement powers over our members – for example, we cannot award redress or stipulate lending criteria. We can only investigate complaints against our members where they have failed to adhere to our Standards – but only once the regulated complaint process has been completed.

This process starts with a complaint to the adviser firm. This can be written or verbal, but it does usually help if you can put in writing to them at outset the concerns you have, the situation you now find yourselves in and the timelines involved. They then have very strict process to follow, which they will detail for you on receipt of your complaint. They should be able to provide you with their decision (to uphold or reject your complaint) within 8 weeks. If they cannot provide a final response within this period, or if you are unhappy with the response they have provided,  you will then have the right to refer your complaint to the Financial Ombudsman Service (FOS), who will then conduct their own investigation and provide you with their findings in due course – this process has no formal timescales, and the Ombudsman’s decision is binding. You will not incur fees from either the adviser firm or FOS for conducting their investigations.

More information about the Financial Ombudsman Service is available here www.financial-ombudsman.org.uk

If you wish to make a complaint, then, you should first contact the adviser/ firm to express your concerns and ask them to open the complaint process. You may also wish to complain to the provider, although they may also refer you to the adviser firm in the first instance. If you do not know who the adviser was originally, the provider will be able to tell you. You can then check the Financial Services Register Home (fca.org.uk), where you will find current contact details and information about where to direct your complaint.

Lifetime Mortgages were regulated in 2004 and Home Reversions in 2007. If you wish to complain about products taken out or advice given before these dates your complaint may be rejected. Please also note that until 2012 only providers could be members of the Council and we would therefore be unable to look into a complaint against an adviser, solicitor, or firm other than a provider for any transactions conducted before this time.

The Council is not able to stipulate lending criteria, it is up to individual providers to set these. We do not hold information about current provider criteria and would recommend advisers to speak with a mortgage desk such as Answers in Retirement or Advise Wise, who will be able to assist.

Potentially, yes. If they are in receipt of any benefit payments this should be checked with the relevant benefit agency whether taking out an Equity Release mortgage could affect this before you commence the application process. A number of reports are available online (such as Ferret/ Fintal, entitledto or gov.uk) which will enable you to confirm the position for your customers.

You should also discuss whether the customers have investigated any entitlement to grants or other sources of funds with them before making any recommendations.

Council members can view our recent Social Care webinar in the Members’ Lounge area of our website.

Sharia law prohibits the concept of borrowing and paying interest on loans: conventional residential mortgages therefore present a problem for consumers who wish to observe Sharia law strictly.  In 2007 the Financial Services Authority (now the Financial Conduct Authority) expanded its rules to accommodate the concept of what it described as “home purchase plans” – which are compliant with Sharia law.

There are at present no Sharia-compliant lifetime mortgage products – since these work on the basis of interest being charged to the borrower’s account and rolled up for payment at the point where the property is sold.  Home reversion plans are more likely to be suitable for consumers who wish to release equity in a way which is compliant with Sharia law, since a proportion of the borrower’s property is sold, and there is no loan involved.

There are various methods of home purchase which are compliant – the main ones being

“Murahaba” and “Ijara”.  Basically they work like this:

• Murahaba – the bank buys the property and sells it back to the customer at a higher price.  The customer then pays the higher price by way of paying equal instalments, over a fixed term.
• Ijara – this is more common:  the bank buys the property and sells it back to the customer – on a leasehold basis – so the customer pays rent for a fixed period, at the end of which the (freehold) property becomes the customer’s.  The amount of rent paid each year is assessed according to market rates, not prevailing interest rates.

Yes this is possible, either by moving to a different scheme with your existing provider or to another provider altogether. Either way, you should take advice from a suitably qualified adviser, who will look at all the options for you, bearing in mind that there may be significant costs involved in switching, including early repayment charges.

No: most providers will not accept static or mobile homes as suitable security – either for a standard mortgage or an equity release loan.

Releasing funds from your property to pay for either care home fees or for care in your own home is a frequent use of Equity Release mortgages. Caution should be taken, however – if the property owner(s) are moving into long-term care and leaving their home this could mean that an Equity Release mortgage would not be permissible.

Your adviser will investigate and discuss any implications of taking Equity Release on any benefits you are receiving. He/ she will also discuss whether you may be entitled to any grants or similar governmental support which may be more appropriate for you than an Equity Release mortgage.

Yes, this is an often-overlooked option! Your adviser will be able to guide you through this process. It is a way of potentially purchasing a higher value property, but you should also bear in mind the possible restrictions that providers may have about property type before you purchase.

Customers should be aware that purchasing a property and using Equity Release in this way can take longer than simply raising a standalone Equity Release mortgage. This could mean that rates change during the application process (or even that an offer may run out, necessitating a new offer). New rates could be higher or lower than the rate originally recommended.

Many lifetime mortgages now have a facility to allow payments to be made, which can alleviate this impact. This facility has been written into the Council’s Product Standards, so that it must be included in all new products coming to market which providers wish to be Equity Release Council compliant.

Yes, there are providers who will consider properties in these areas. Your adviser will investigate the options for you and ensure you are aware of any restrictions or stipulations in this regard.

You may have lots of questions, depending on your own circumstances but your solicitor should be happy to help.  Your solicitor may ask you security questions on the telephone, to avoid attempted fraud and you should never put your bank details on email, or send money to a solicitor following an emailed request.  Your solicitor will want to verify who you are and where the proceeds of your equity release are being paid, to ensure that your interests are fully protected at all times.  Your solicitor will not usually pay the proceeds of your equity release to a third party.

Many providers are currently very busy, and this inevitably can cause delays. It is important that you, your adviser, solicitor, and the provider all keep in constant contact to ensure that these delays are kept to a minimum and that you complete your mortgage in a timely manner, bearing in mind the validity periods of mortgage offers. If you have any concerns about delays and any costs which you may incur as a result, you should contact your adviser in first instance. If delays continue you may wish to make a complaint to the relevant firm to establish why this has happened and what can be done to expedite your application (see the section on how to make a complaint).

A down valuation means that the property has been valued at less than the customer had anticipated. This might happen where, for example, the customer may have lived in the property for a number of years and not had cause to have it assessed. It may also happen when a surveyor notes some unforeseen problem with the property (such as damp) that will need remedial works and which in turn affects the property’s current value. Customers may appeal against down valuations but strong evidence will be needed to challenge such as recent local sales data. If the down valuation is due to a need for remedial works, a revaluation following the completion of the work may resolve the issue.

It is helpful to have Powers of Attorney, especially if you are considering a lifetime mortgage with a drawdown facility. You should discuss this with your adviser.

Gilts or bonds are issued by the UK Government and by private companies. Buying a gilt or bond means that you lend money to the issuers for a fixed time period in return for a fixed interest rate. Gilts are considered the safest bond category as it is unlikely that the UK Government will default. Equity release interest rates are substantially lower than they were a few years ago, from over 7% to nearly 5%. Contrary to standard mortgages this was not driven by the cuts to Bank Rate. The dropping rates arise because lenders – generally insurance companies – raise the amounts they lend through diverse resources. Equity release provider rates depend on the principal returns on government bonds. These gilt “yields” have dropped since the Bank of England (BoE) started printing £375bn of “quantitative easing”, to fuel the economy during the 2008 recession. For that matter, insurance companies were able to drop equity release rates.

Products which fully meet the Equity Release Council’s Product Standards are required to feature a “no negative equity guarantee”.  Put simply, this guarantee means that you, or more specifically, your estate will never owe more than the property is worth when it is sold.

Under your equity release plan, you have the right to live in your home until you need to move into a smaller property (whereby the plan may be transferrable), or move into permanent care, or until death. Your property will be sold and the sale proceeds will be used to repay the money owed to the provider of your plan. Any money left over, at the end of your plan, will be paid to you or your beneficiaries, in accordance with your Will.  In the unlikely event that the value of your house has decreased significantly, it is possible that it might not be worth enough to cover the amount which you owe.  The “no negative equity guarantee” means that if this turns out to be the case, the remainder of the loan would be written off.

The equity release provider is accepting your property as security for its loan: this means that the provider needs to be satisfied that your property can be re-sold on the open market – either when you or your executors come to sell it or, in exceptional circumstances, if the provider has to take possession of it (because you have failed to comply with an obligation set out in your contract) and sell it.

Many lenders/providers ask questions in their application forms about your property’s age and how it is built (brick walls/roof slates or tiles and so on).  This is because some types of construction have in the past suffered structural defects.  This doesn’t mean that they are not safe to live in – but it has led some lenders and providers to decide not to accept them for mortgage/equity release purposes, because they are concerned that if there are problems in the future which need to be put right, this may affect the property’s value and its attractiveness to a future buyer.

Properties which are unlikely to be acceptable to equity release providers include:

• Studio or basement flats
• Flats of maisonettes in a local authority or housing authority block of more than four storeys
• Retirement properties
• Static/mobile homes
• Houseboats
• Farms
• Hotels
• Guest houses/B&Bs

Providers (and the funders behind them) set their own lending criteria for acceptable properties. The Equity Release Council is not able to mandate these criteria although we do constantly liaise with providers and funders to seek to effect change/ evolution.

If your home (or the home you are buying) has any more unusual building features or geographical considerations you should ensure your adviser is aware of these as some providers will not accept certain property types such as timber frames, concrete construction and flat roofs. Spray foam insulation is very frequently a problem to providers. Living in a flood area can also cause difficulties. Some useful information is available here media.kg-cdn.co.uk/mediacontainer/medialibraries/more2life/more2life/learning%20lab/a-guide-to-lending-criteriarb.pdf    NOTE THAT THIS INFORMATION MAY VARY FROM PROVIDER TO PROVIDER

Potentially, yes. If you are in receipt of any benefit payments you should check with the relevant benefits agency whether taking out an Equity Release mortgage could affect this before you commence the application process. Your adviser will be able to assist you with this and may also be able to run a benefits check report on your behalf.

The use of an equity release scheme will reduce the value of your estate. You should speak to your financial adviser if you are considering using equity release for this purpose.

If you are married, in a civil partnership or living with someone else as a partner and you are both eligible by age, you can take out a joint equity release plan. Your spouse or partner will then have the right to live in the property for as long as they wish, should you die or move into long term care. If you have a friend or tenant living in your home the provider will want to make sure that they have no rights to continue to live there when you die or move out, as that is the point at which the loan made to you will have to be repaid, through the selling of the property.

If your plan is in joint names, then your partner will be able to continue living in the property under the same terms.  If it is in your name only, then unless the mortgage can be repaid in full the property will have to be sold and your partner will have to find somewhere else to live.  It is normally a requirement that where the borrower clearly has a spouse or partner, the plan is written in joint names from the outset to make sure that both individuals have the right to remain in the property until they die or move out.

If you marry after you have taken out a plan, or if someone comes to live with you as your partner, then you must tell your provider.  It may not be possible to add your new spouse or partner to your plan, in which case they will not necessarily have the right to continue living in the property if you die or move into long term care.

Most lenders will agree that you can share your home with a partner/son/daughter/carer or other relative but will almost always insist that the occupier signs a waiver, confirming that they will move out as soon as you are no longer living at the property (usually because you have died or moved into long-term care).  Many lenders also insist that the occupier has independent legal advice, which will need to be with a different solicitor to the one that you have instructed to act for you.  Please be aware that this will add to your legal fees, so we recommend that you shop around to obtain a quote.

Taking out an equity release plan could leave your family with little or nothing to inherit from your property.  You need to be comfortable with this possible outcome, and may wish to discuss it with them before committing yourself. You may also want to consider including your family in any discussions you have with your financial adviser or your solicitor.

You may be considering to release equity from your home to help younger family members get on to the property ladder or pay for school or university fees etc.  If this is the case, you need to consider the implications of releasing the equity now, as it will not be available later on should you need it for other purposes.

You can also get information from individual Equity Release Council members or from other qualified advisory firms.

Your family will not automatically inherit the property following your death, since your equity release provider will be entitled to recover as much as possible of the amount they had lent you (known as a 1^st charge), and this often means that the property will have to be sold.  If your family wished to keep the property, they would have to discuss with your equity release provider whether it might be possible for them to pay off the remaining debt.

Yes. At advice stage some providers have their own adviser teams however these will generally only be able to offer advice on their own products, rather than from the whole of the market.  Remember that under Financial Conduct Authority regulations all Equity Release transactions must be “advised sales”, meaning that you must receive advice from a suitably qualified and authorised adviser, who will also submit your application and liaise with yourself, the provider and other parties throughout the process.

Once you have completed on your mortgage you will receive an annual statement from your provider and you are at liberty to contact them direct for more information about your mortgage.

As with any other mortgage, there will be conveyancing work to be done. Consumers will need to take legal advice independently of the provider’s legal team. The Council’s requirement is that this advice must be face to face. .If your solicitor is not able to see you himself (maybe because he is in a different part of the country), he may appoint an agent or notary to see you on his behalf. The Solicitor acting has to sign a certificate to confirm that this has been done and that you understand the contract which you are entering into. This certificate is provided by the Equity Release Council.

Much care is taken throughout the process to ensure that any vulnerable customers (eg. someone with a sight impairment, early onset dementia or whose first language is not English) are appropriately catered for and any concerns (such as coercion) addressed before the case proceeds.

The Solicitor acting for the customer does not have to be a member of the Equity Release Council.

 Any person aged 17 or over who lives in the property will also need to take legal advice to confirm that they understand their position and rights once the mortgage is in place and, more particularly, when the property is sold and the loan repaid.

It is a requirement of the Council that customers receive in person, face to face, independent legal advice. If your solicitor is not able to see you himself (maybe because he is in a different part of the country), he may appoint an agent or notary to see you on his behalf. The Solicitor acting has to sign a certificate to confirm that this has been done and that you understand the contract which you are entering into. This certificate is provided by the Equity Release Council.

Much care is taken throughout the process to ensure that any vulnerable customers (eg. someone with a sight impairment, early onset dementia or whose first language is not English) are appropriately catered for and any concerns (such as coercion) addressed before the case proceeds.

The Solicitor acting for the customer does not have to be a member of the Equity Release Council.

Any person aged 17 or over who lives in the property will also need to take legal advice to confirm that they understand their position and rights once the mortgage is in place and, more particularly, when the property is sold and the loan repaid.

Under Financial Conduct Authority regulations all Equity Release transactions must be “advised sales”, meaning that you must receive advice from a suitably qualified and authorised adviser, who will also submit your application and liaise with you, the provider and other parties throughout the process.

You can check whether an adviser has the appropriate authorisation on the Financial Services Register  Home (fca.org.uk). You may also visit the “Find a Member” section of the Council’s website, where you will be able to locate an adviser (or solicitor) who is a Council member in your area.

Most lifetime mortgage borrowers will never have to pay an early repayment charge (ERC). However, ERCs might be imposed by provider if a borrower wants to make repayments above the agreed limits or before a lifetime mortgage has run its full course. ERCs are there to cover the losses the provider may incur when a borrower repays sooner than was expected and there are two different types.

The first type, fixed (or defined) amount ERCs, are fixed but they can taper. For example, a provider might charge a penalty of 10% in year one, 9% in year two, 8% in year three and so on. Each provider has its own variation of this sliding scale, but borrowers will always know the fixed penalty up front.

The second type, variable ERCs, can seem complicated, but they are quite straightforward and are based on the value of something called a gilt. Gilts are government bonds often favoured by investors making long term investments, such as equity release providers.

If gilt yields rise in the time between the borrower taking out equity release and when they try to repay early, no ERC will be due. But if they have fallen, the provider will impose an ERC relative to the fall in value.

Gilt linked ERCs typically are capped at 25% of the amount borrowed and there are some instances when neither a fixed nor gilt-linked ERC will apply, such a compassionate window.

The Equity Release Council has produced two consumer factsheets which are available at the following links early repayment charges explained and calculating early repayment charges. Borrowers should always seek guidance from an adviser.

With a mainstream mortgage customers pay the interest due on a monthly basis. With a lifetime mortgage, the interest due is simply added to the mortgage account. This means that interest accrues over the term of the mortgage and can significantly impact on the amount owed over time.

Many lifetime mortgages now have a facility to allow payments to be made, which can alleviate this impact. This facility has been written into the Council’s Product Standards, so it must be included in all new products coming to market that providers wish to be Equity Release Council compliant.

If you repay a Lifetime Mortgage early you may have to pay an Early Repayment Charge.  These charges can be quite expensive – but before you took your plan out you will have been given information about the maximum you might have to pay in the event that you decided to repay some or your entire loan early.

Most equity release plans are intended to be long-term options. You should make sure that you tell your adviser when you take out your plan if you think there might be circumstances in which you might want to repay your loan early. The products available vary – some have no early repayment charges, some apply the charge to a specific number of years after the plan was taken out, and others apply the charge throughout the life of the plan.  You will need to take into account the cost of the plan you are considering along with the possible cost of an Early Repayment Charge – your adviser will help you decide which option is best for you, given your circumstances.

If you have a Home Reversion Plan and want to pay off the loan early, you may have to sell your share of the property to pay off the outstanding amount which you owe your provider.  You may find that this leaves you with too little money to buy another property.  However, the Equity Release Council’s rules require members to allow customers to move to a suitable alternative property, so if you are able to find another suitable and affordable property, this might be the best option for you.

Under the terms of your Lifetime Mortgage, the rate of interest that will be charged on your loan will either be fixed, or it will be variable, in which case there will be a “cap” (upper limit) on the amount that can be charged at any time.  If the rate is fixed, it will be fixed each time you withdraw funds from your plan.  Over time, therefore, you could have several amounts of money which you have released at different times, and each would be subject to a different fixed rate of interest, which would then be added to the total amount which you have borrowed. You will not have to pay back any of this money until your plan comes to an end and your property is sold or you choose to repay the loan.  At the time you take out the plan you may however be asked to pay a number of other fees to cover the costs of setting up the plan.  They will include fees payable to:

• The Provider which is financing your plan.  These may be described as “application” or “administration” fees;
• Your Adviser, who will carry out detailed research into the options and recommend the most suitable plan from the range available, followed with a written report containing recommendations and a personalised Key Facts Illustration (KFI). Should you wish to proceed, your adviser will arrange all of the required paperwork with the provider and handle things through to eventual completion and release of the funds;
• Your Solicitor, for giving you independent advice on the plan to help you understand how it will work, and for carrying out the necessary conveyancing (legal) work; and
• The surveyor (valuer) who will inspect your property in order to give the provider an independent estimate of its value at the time you take out the plan.

Some firms may not charge fees in all of these categories and others may structure their plans so that they offer cash-backs in order to balance the cost for you.  You will need to research the market thoroughly to ensure that you find an option which suits you.  The level of fees may also vary between firms, clients will always incur own solicitor costs, but some adviser firms don’t charge any fee and neither do some providers.

Yes you can have Equity Release on leasehold property. Providers will all have slightly different criteria on what is or is not acceptable in terms of the remaining length, or ‘term’ of the lease. The provider/lender will want to know that it can sell the property at the end of your equity release term, so they might want an unexpired term of at least 75 or 80 years, plus confirmation from a surveyor that the property is in good condition and would sell easily if necessary. Check with your provider, or ask your adviser to make enquiries before you go ahead, so you understand their criteria.

If the lease is too short for a provider/lender, you may have a couple of options available to you. For example, you may be able to buy the Freehold, or a share of the Freehold with other flat owners, or you may be able to extend the term of the lease. These options carry a cost, so make sure you investigate these thoroughly with your Landlord or the Managing Agent. You can find out more from the Leasehold Advisory Service.

If the deeds are in joint names, you are unable to apply for equity release without a deputyship order, unless there is another attorney on the POA who is not named on the title deeds. It is HM Land Registry rules.

Currently, if you are aged over 65 and are in receipt of Pension Credit, your entitlement is assessed at the start of an Assessed Income Period (AIP) which may run for a period of up to 5 years.  During your AIP, you do not need to report any changes in income, savings or pensions which might impact on your entitlement to receive Pension Credit.  If you are aged over 75, your AIP will remain in place until your household circumstances change, for example, if you move into a care home.

The Pensions Act 2014 introduced changes to abolish AIPs from April 2016. This means that, after your current AIP finishes, you will need to report changes to income or capital as soon as they take place.  If you take out an equity release plan, this could affect your entitlement to Pension Credit, unless equity release is taken out for an approved purpose such as essential home repairs.

The exact circumstances in which it would be considered acceptable to take equity release without impacting your entitlement to benefits, would ultimately be a matter for the Department for Work & Pensions (DWP) to decide.

AIPS after 2016 – in a Nutshell

• From 6 April 2016, no new AIPs will be set.
• If you already have an AIP that is due to end between 6 April 2016 and 31 March 2019, it will end – either on the original date on your Pension Credit Award letter, or earlier if your household circumstances change.
• If you already have an AIP that is due to end on or after 1 April 2019, it will end early and will not be renewed.
• If you currently receive Pension Credit, the DWP will write to you telling you the new end date 6 months in advance.  You can also find the new end date on the DWP website.

The Council is keen to ensure that if you are proposing to enter into an equity release plan, you fully understand that this may have an impact on any Pension Credit to which you are entitled and that you avoid taking a decision which may result in your losing out financially. All equity release plans are sold with full financial advice, and your adviser will take this issue into account.  The Council also requires your equity release provider to make sure that you receive independent legal advice on the implications and potential consequences of taking out an equity release plan, to help you make a fully informed decision.

Your Attorney can only act for you if you have lost mental capacity and are unable to deal with the application and paperwork in your own right.  This is primarily to protect your interests and to avoid fraudulent applications.  If there is any doubt about whether or not you can deal with the paperwork personally, your solicitor will insist on a mental capacity assessment.  This can be via your GP, social services or a private report can be obtained.  There may well be additional fees to pay (and this will always be the case if you instruct a private assessment).

Advisers and providers of both types of plans are regulated by the Financial Conduct Authority (FCA).  Additionally, the Equity Release Council – as the trade body, representing over 350 members of equity release professionals, works to raise high standards and ensure that customers receive the best possible advice and service. Members have voluntarily signed up to additional rules of principle, as testament to their commitment to this ethos.

Giving advice on equity release products (lifetime mortgages or home reversions) is a “regulated activity” – which means that those who give such advice must be authorised and regulated by the Financial Conduct Authority (FCA) and abide by its rules.  The FCA requires all equity release advisers to have an appropriate professional qualification and it sets out a list of approved qualifications in the “Training & Competence” chapter of its Handbook of rules.  You can find the full list of approved qualification here but the main ones to look out for are:

• CeRER (Certificate in Regulated Equity Release) – awarded by the Institute of Financial Services (IFS) (relevant webpage is here).
• CER (Certificate in Equity Release) – awarded by the Chartered Insurance Institute (CII) (relevant webpage is here).
• ERMAPC (Equity Release Mortgage Advice & Practice Certificate) – awarded by the Chartered Institute of Bankers in Scotland.  The ERMAPC was discontinued a few years ago but may still be held by some advisers.  The CIOBS’s general qualification for mortgages is its Mortgage Advice & Practice Certificate (relevant webpage is here).

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.

England

Your property needs to be held in the name of the person applying for the equity release loan.  If your spouse has died, the way that your solicitor will deal with this will depend on the way in which you owned the property together.  In English law, there are two ways of owning property with somebody else: joint tenants or tenants in common.  Your solicitor will be able to check your title deeds and advise you which applies to you.  If you were joint tenants, your solicitor will simply need to take a certified copy of the original Death Certificate of your spouse to take the name of the deceased person off the title deeds.  If you were tenants in common, this means that a trust has been created and will need to be wound up.  The complexity of this will depend on whether your spouse left a Will, whether you have obtained a Grant of Probate and who the beneficiaries are.  Your solicitor will be able to look at all of this for you and to advise you what needs to happen next.  You should prepare for additional costs if a trust needs to be wound up, especially if the deceased person did not have a Will, so always ask for a quote at the outset.  It is possible that your solicitor may ask you to appoint a third party solicitor to deal with this aspect as they may not be expert in this particular area of law.  Often, it makes sense to return to whichever solicitor you used to draw up your Will (if applicable) for this part of the work, as they will be familiar with your family arrangements.  Otherwise, ask your solicitor for a recommendation.

Scotland

Your property needs to be held in the name of the person applying for the equity release loan.  If your spouse has died, the way that your solicitor will deal with this will depend on the way in which you owned the property together.  Your solicitor will be able to check your title deeds and advise you.  In some cases you may be asked to provide an Extract Copy of the Death Certificate.  In other instances, additional legal work will be required and this could be complex depending on whether the deceased had a Will. You should prepare for additional costs especially if the deceased person did not have a Will, so always ask for a quote at the outset.  It is possible that your solicitor may ask you to appoint a third-party solicitor to deal with this aspect as they may not be expert in this particular area of law.  Often, it makes sense to return to whichever solicitor you used to draw up your Will (if applicable) for this part of the work, as they will be familiar with your family arrangements.  Otherwise, ask your solicitor for a recommendation.

Your property needs to be held in the name(s) of the person/people who are applying for the equity release loan.  If there are two of you, but only one of you is the legal owner of the property, it will usually be necessary to transfer the deeds into joint names.  Your solicitor should be able to do this for you at the same time as the standard work on the equity release, but will charge you a higher fee.  You should ask for a quote in this respect before you ask your solicitor to proceed with the drafting of the transfer.  Some solicitors are not prepared to deal with the drafting of the Transfer deed alongside the equity release and, if this is the case, you will need a third party solicitor to quote separately for this work.

A Lasting Power of Attorney (LPA) is a legal document enabling you to appoint one or more people to assist you in making decisions or to make decisions on your behalf. LPAs were introduced in October 2007 and replaced Enduring Powers of Attorney (EPA). EPAs made prior to October 2007 remain valid, however the content here relates to LPAs only. The information which follows derives from government websites and concerns England and Wales only.

There are two types of LPA:

(1).        Health and welfare LPA:  gives an attorney power to make decisions relating to matters such as; your daily routine (e.g washing, dressing, eating); medical care; moving into care and life-sustaining treatment.  A health and welfare LPA can only be used when you are unable to make decisions for yourself.

(2).        Property and financial affairs LPA: gives an attorney power to make decisions relating to money and property including matters such as; managing a bank or building society account; paying bills; collecting benefits or a pension and selling your home.

Giving someone else this authority may be very important because you could at some point in the future find yourself in a position where you are unable to make decisions and run your affairs. This could happen if, for example, you were injured in an accident or suffered physical or mental illness.  The Office of the Public Guardian (OPG) can help you in deciding whether an LPA is appropriate for you. The OPG is in place to protect people in England and Wales who may not have mental capacity to make their own decisions relating to their health and finance. Contact details are available via the following website https://www.gov.uk/power-of-attorney/overview

An LPA must be registered with the Office of the Public Guardian (OPG) before it can be used. It is possible to end an LPA even if it has been registered provided you still have mental capacity at the time.

Attorneys appointed under an LPA must act in the best interests of the individual. This is particularly important as an attorney may be dealing with financial matters including spending money and/or making decisions about your property and assets.

Please note this is a short overview of Lasting Powers of Attorney in England Wales. There are a number of information sources available via the internet and you may also decide to seek legal advice. Processes in Scotland and Northern Ireland are different and information can be obtained via the following hyperlinks http://www.publicguardian-scotland.gov.uk/power-of-attorney and http://www.nidirect.gov.uk/managing-your-affairs-and-enduring-power-of-attorney.

England

Your solicitor will usually want to check your title deeds at the outset.  They can tell you if your deeds are registered at the Land Registry or unregistered.  If your deeds are registered, your solicitor can download them from the Land Registry’s online portal, which usually costs between £3 and £6 for a freehold property.  If your deeds are not yet registered, your solicitor will need to obtain them.  If you already have a mortgage, your current lender will be holding any unregistered title deeds so please let your solicitor know your mortgage account number.  Your solicitor can then obtain your deeds directly.  If you are holding the deeds at home, we recommend that you send them to your solicitor by Royal Mail Special Delivery (or deliver them by hand) so that they are not lost.  If your deeds are not registered and cannot be located, your solicitor will need to do extra work to reconstruct the title to your property and will charge you an extra fee to do this.  This should be agreed with you before the work is carried out, so please always ask for a quote.

Scotland

Your solicitor will usually want to check your title deeds at the outset.  They may already hold your deeds.  If you already have a mortgage, your current lender may be holding the title deeds so please let your solicitor know your mortgage account number.  Your solicitor can then obtain your deeds directly.  If you are holding the deeds at home, we recommend that you send them to your solicitor by Royal Mail Special Delivery (or deliver them by hand) so that they are not lost.  If your deeds cannot be located your solicitor will be able to obtain copies and will charge you an extra fee to do this.  This should be agreed with you before the work is carried out, so please always ask for a quote.

You need to appoint your own solicitor to represent your interests, once a financial adviser has recommended a suitable equity release plan to you.  A solicitor is required to ensure you receive completely independent legal advice about the risks, rewards and obligations attaching to an equity release plan.  They will also carry out the conveyancing required to ensure that your new equity release lender is able to secure a first legal charge against your property and that any existing secured borrowing has been  (or will be) repaid.  Your solicitor will not be able to tell you whether or not a particular product is suitable for you, as this is the role of your financial adviser.  If you do not have a solicitor, you can click here to find one who is used to dealing with equity release cases.

Once you have made your choice, your solicitor will send you an engagement letter and terms of business.  This letter will give you all the information you need about how much the legal process will cost, so that there are no nasty surprises at the end.  The costs that you are quoted will assume that your case is standard and straightforward, unless you have already advised your solicitor that they will need to carry out additional work for you.  Your solicitor will also give you an overview of what they will do for you in return for the fee and an estimate of how long they think it will take.

It is helpful to have Powers of Attorney, especially if a lifetime mortgage with a drawdown facility is being recommended.

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.

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.

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.

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.

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.

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.

The Equity Release Council membership includes qualified Financial Advisers and you can find their contact details on the Equity Release Council members’ directory (https://www.equityreleasecouncil.com/member-directory/).

Equity release product standards are set out below:

• 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.
• 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.
• 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.
• The product must have a “no negative equity guarantee”.  This means that 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.
• 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.

Our members are only allowed to tell you that a product meets these standards if it meets all of them.  If you are offered or are considering a product that does not meet all of the standards, the product literature must explain which standards are not met, and give an illustration of the types of risk that this might pose for you.

* The Council also has product standards for mandatory payment lifetime mortgages. To view these please refer to Standards v12 Part A.

The Equity Release Council is a voluntary trade body to which advisers, providers, solicitors and other professionals in this market can belong. We are not the regulator (this is the Financial Conduct Authority), nor do we have any enforcement powers over our members. The Council is not authorised to offer advice or to arrange Equity Release or other types of mortgages.

Yes: equity release plans which comply with our full product standards give you the right to move to a “suitable alternative property”. This means a property which your provider would accept if it were setting up a plan for a new customer. There are some properties which providers would not be able to accept – and this is usually because there would be restrictions on their ability to sell the property in the open market when your plan comes to an end.  So, for instance, homes which are built in retirement complexes are not generally acceptable, because the provider would not be able to sell them in the open market.

There may be other restrictions on the types of property that will be acceptable to providers – such as the type of construction.  See question on “Why are some types of property not acceptable to equity release providers?”

Your equity release plan is designed to enable you to stay living in your home until you either die, or become unable to continue living there.  If you need to move into long-term care, and don’t have a spouse or partner who is still entitled to live in the property, it will be sold and the amount you borrowed, plus interest, will be paid back to your equity release provider.  In these circumstances you will not have to pay any Early Repayment Charges, which can sometimes be payable if you decide to re-arrange your plan with another provider.  Your equity release contract will explain how much time will be allowed for you or those acting on your behalf to sell your property.  The time allowed is typically between 6 months and 1 year.

You might find that you wish to move in with a member of your family, as an alternative to going to live in a nursing home.  Obviously this will depend on what sort of support and care you might need at that stage, and what options are open to you.  You should check carefully how your proposed equity release provider would respond in this situation as some will only allow you to move in with a relative if your medical needs require this.  Others may not be so specific.  If you think it might become a relevant issue at some point in the future, make sure you ask the question and get a clear answer.

If the property is being sold after your death, your beneficiaries/executors of your Will will be in charge of selling the property on the open market – that is, via an Estate Agent, so that it is sold for what is known as its “market value.”

If you are still alive when the property is sold, you may have appointed an Attorney to handle your affairs, in which case he or she can arrange the sale.  If not, most equity release providers include a very specific Power of Attorney in their contract terms and conditions, which allows them to take over a sale if progress is not being made by the borrower or his/her personal representatives (who may also be executors if the borrower has died).  This power is completely standard in ALL residential mortgages and is not peculiar to equity release: in effect it makes sure that the provider/lender is able to sell your property and recover the debt owed to it.

You or your estate will be responsible for paying all the costs of the sale, including solicitors’ fees.  Some providers may also charge an administration fee for removing their charge against the property, which is registered at the Land Registry.

There are two types of equity release; Lifetime Mortgages and Home Reversion plans. Both of these are regulated by the Financial Conduct Authority. By using an equity release product, a homeowner can draw a lump sum or regular smaller sums from the value of their home, while remaining in their home.

A Lifetime Mortgage is very similar to a mainstream interest only mortgage, with the main difference being that the interest is added to the account on a regular basis and “rolled up” over the term. Some products will allow payments to be made to reduce the impact of this roll up. The loan plus interest is repaid from the sale of the property, either on death (or second death) of the applicants or move into long term care.

Under a Home Reversion scheme the provider buys a share of the property in return for a lump sum. On sale of the property (on death or move into long term care) the provider receives their share of the proceeds. You may not receive a lump sum equivalent to the value of the share sold.

All Equity Release products must be “advised sales” under Financial Conduct Authority regulations. This means that a suitably qualified and authorised adviser will need to take detailed information about your situation and requirements, then consider all options (including mainstream mortgages, Retirement Interest only mortgages and other options) before making a recommendation to you.

Equity release can play a crucial role in retirement funding and the flexibility and safeguards which are built into plans that complies with the Equity Release Council product standards enable thousands of homeowners every year to tap safely in to their housing wealth without having to worry about making monthly repayments.

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. A fully qualified financial adviser should 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 they 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 is 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. 

Download our Consumer Guide to Equity Release here. Alternatively, the industry-wide Working Together group has produced an informative leaflet here. 

It is important to consider all options (not just Equity Release) – mainstream mortgage, retirement interest only mortgage, and Equity Release mortgage – alongside other avenues such as a personal loan, help from family, or even taking a lodger, before deciding whether Equity Release is “right” for you.

Your adviser will need to discuss these options with you. In order to reach a recommendation he/ she will ask for detailed information about your situation and requirements (including your income position). This is expected practice so that the adviser can consider all of the available options, including (but not limited to) Equity Release.