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Is Equity Release Safe?

    Is Equity Release A Big Bad Wolf?

    It's safe to say that equity release isn't the big bad wolf that'll blow your house down anymore. Thanks to all the safety features that come with equity release, it's an excellent way to loan money nowadays.

    How Safe Is Equity Release?

    During the 1980s - early 1990s, equity release schemes had a bad name. It was due to increased corruption in the industry. Deceitful lenders were undertaking expensive deals, causing homeowners to owe more than the value of their homes.

    Not to worry!

    The result was something positive, as industry regulations became more strict.

    The Financial Conduct Authority (FCA) helped improve equity release processes with their regulations and customer protection policies. Equity release is now so much safer than before.

    Most providers are also members of the ERC (Equity Release Council), the trade body setting standards and best customs and procedures for equity release companies and financial advisors.

    No Negative Equity Guarantee

    They protect you from repaying more than you owe to your equity release provider. If the estate's market value decreases and the money can't repay your mortgage, the lender won't request more cash from your estate or heirs.

    Therefore, consider the equity release firm that will offer you this protection.

    Is Equity Release Truly A Safe Option?

    Here are seven reasons making equity release the best thing in your life:

    1. The Financial Conduct Authority

    The FCA oversees and monitors the industry in the UK, specifically.

    What does it mean for you?

    They regulate financial product lenders, advisers, and brokers, and equity release products. Thanks to the FCA, you can now have sufficient protections to look after your best interests.

    Equity release is incredibly safe nowadays.

    The FCA also provide you with a way to take legal action against the providers who aren't meeting the requirements stipulated by them.

    2. The ERC

    The ERC, or the Equity Release Council, governs equity release specifically. They require every provider to follow their strict code of conduct, rules, and regulations. So, your money and your rights remain protected.

    Some of their protection services are:

    All plans need to have a 'no negative equity guarantee'. It ensures that your family won't need to pay back outstanding money (if your house sells for less than your loan value).

    3. Your Family Won't Be left In Debt

    Suppose you're thinking about taking out a lifetime mortgage with an approved equity release lender. In that case, you will most definitely need the no negative equity guarantee to safeguard your family.

    Let me tell you something:

    Suppose the value of your property decreases significantly, and you get less money selling it. In that case, the equity release provider will write that off when you die.

    4. You Can Occupy Your House

    You should know that they allow you to remain in your home for the rest of your life, even after you've released equity from your property.

    Now:

    With lifetime mortgages, you get to stay in your house. And you don't even have to sell part of your home to get the money you need. You'll be borrowing it against equity.

    Best of all,

    If it's a joint partnership, you'll still be the sole owner until both parties die or go into long-term care.

    5. You Can Move To A New House

    The ERC gives you the right to take your equity release plan to your new home, as long as you're moving to a home that meets your lender's terms.

    6. You Must Consult an Advisor

    The ERC requires that you ask a professional for advice before applying for an equity release plan. This professional adviser should be a qualified equity release consultant. The Equity Release Council keeps a directory so that you can confirm they're suitable.

    7. Your Estate May keep Inheritance

    As you know, equity release loans get repaid when your house gets sold by your provider, plus interest that it's accrued. 

    Listen here:

    If there's money left after it has repaid the loan, your heirs (according to your will) can receive that.

    Conclusively

    Equity release is an excellent option in the right conditions. Before deciding, you must understand what's involved and how beneficial equity release is for you.

    You should ensure that you seek consultancy from an independent adviser who'll walk you through understanding the details, help you decide on a plan you won't regret.


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