Firms selling equity release have to give you certain important information to help you decide on whether to enter a scheme. Here’s a summary of what to look out for and what you’ll receive.
Regulation of equity release schemes
Firms advising on or selling equity release have to be:
- The agent of a regulated firm,
- The UK’s financial services regulator, or
- Regulated by the Financial Conduct Authority (FCA).
And they need to have a relevant equity release qualification to give advice.
Under current rules, all firms offering equity release products must offer you advice.
This means making sure equity release is right for you and, if it is, only recommending a product that is suitable for your needs and circumstances.
You can complain to the Financial Ombudsman Service if the advice you were given turns out to have been unsuitable for you.
Always make sure the firm you use is on the FCA Register.
If they aren’t, you won’t have access to complaints and compensation procedures if things go wrong.
Follow the link below for information on what to do if you have a complaint about a financial adviser.
There are some lifetime mortgages where you have to pay the interest on the loan and/or some capital every month.
If this is the case, the new lending rules mean equity release providers will also have to check that you can afford these regular repayments.
You will have to show evidence of your current and future income, such as:
- Your outgoings
- Bank statements, or
- Pension statements
including other debt repayments, household bills and living costs such as travel, clothing, and entertainment.
This is a complex area and it’s essential you seek independent legal advice if you’re unsure about anything.
Information you will receive
When you contact a provider or adviser they must give you clear information about the service they offer.
They might do this during the initial conversation verbally or in a written document.
Either way they must confirm that they are giving you advice and tell you whether, as part of this service, they:
- Will charge you a fee.
- Offer lifetime mortgages, home reversion plans, or both.
- Offer equity release schemes from the whole market, or from a limited range of providers.
Use this information to shop around to get the service you want at the price you’re happy with.
Once they make a recommendation, the provider or adviser will give you a mortgage illustration document.
This document is usually known as the Key Facts Illustration (KFI).
By 2019, the European Standard Information Sheet (ESIS) will replace the current KFI.
The ESIS document is similar to the KFI but will have more detail about the mortgage and the terms they’re offering you.
Some mortgage advisers and lenders might give you the ESIS when they recommend a mortgage or make a mortgage offer.
While others might continue to give you an enhanced version of the existing KFI document, with supplements of any additional information as needed, until then.
These documents provide a personalised illustration for you and will set out things like:
- Any additional features.
- The service you’re getting.
- What happens if you don’t want the mortgage or plan any more.
- The overall cost of the scheme, as well as any fees you’ll have to pay.
- A description of the scheme, who the provider is and, for a life time mortgage, the interest rate deal.
- What you’ve told them about how much you want to release and the type of scheme you’re interested in.
- Where a lifetime mortgage requires regular payments, how much they would be if interest rates went up – so you can see whether you think you could cope with the increase.
Make sure you read and understand this document and ask the provider or adviser to explain anything that is unclear.
You can use this document to shop around and compare similar schemes from other providers.
Once your application has been approved, you or your adviser will receive an offer document.
It will include details such as:
- The fees
- Your name and address
- The amount you will receive, or
- Any special conditions such as clearing any outstanding mortgages.
Be sure to read it carefully.
Other organisations that can help
If you’re struggling to make ends meet and are looking for financial help, there are several agencies and charities that provide free information and advice.
Get help sorting out debt problems:
Check your entitlement to benefits:
Grants for keeping your home warm if you’re aged over 60:
Financial help for home improvements:
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