Independent Financial Advisers

Equity Release background - Is Equity Release safe? - Are the negative things I hear true? - What do I do next?

Welcome to Investwise Equity Release. If you have found yourself here the chances are you are looking to unlock some of the equity in your home, or help a loved one through the equity release process.  

The money raised from most equity release schemes is yours to do with as you wish. Commonly clients who receive our equity release advice, use the money in the following ways.

• Pay off a small remaining mortgage or clear debts
• Renovate or adapt their home to make it more suitable to their needs
• Replace an ageing car
• Help their children financially to get that first run on the property ladder
• Pay for specialist medical treatment rather than endure long NHS waiting lists
• To reduce or eliminate any potential Inheritance Tax liability on their estate

Equity Release Background 

The concept of equity release has been around for nearly 50 years with the first generation of products coming to the market in the 1960's. The early products gave little freedom on how the money released could be used and as a result were not popular. It was not until the 1980's with booming house prices and high inflation effecting pension incomes that the popularity of equity release really took off. 

A lot of product innovation occurred in the market during the 1980's, but the evolution of equity release was far from smooth! Many of the offerings were unfairly stacked in the provider's favour and often taken after inappropriate advice had being given to clients. The problems stemmed from the fact that financial services was not regulated anywhere near as tightly as it is today, and the standard of qualifications expected of advisers was  virtually non-existent. The lack of regulation resulted in individuals being sold products (which were unsuitable), by individuals not adequately qualified to give competent advice - by today's standards anyway. 

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Is Equity Release Safe?  

In 1991 Safe Home Income Plans (S.H.I.P) was founded. Funded by the leading providers, its brief was to set an Equity Release Gold Standard. Whilst equity release providers had no obligation to follow the S.H.I.P code of practice, simple market forces made is extremely difficult to market an equity release product that did not carry the S.H.I.P approved logo.

• The Financial Services Authority (FSA) took over full regulation of the Mortgage Market in October 2004 which included the equity release product referred to as Lifetime Mortgages and advise on equity release lifetime mortgages. It did not include Home Reversion schemes, where rather than borrow money you sell a portion of your property.
• Seeing the error of their ways, the FSA on the 7th April 2007 extended their remit to include Home Reversion schemes and advice on Home reversion schemes.
• In addition to regulating the market and affording clients the protection of the Financial Ombudsman Scheme should things go wrong, the FSA introduced specialist qualifications in equity release. As well as other general financial advice qualifications, those wishing to give advice on the whole equity release market, will have to hold the appropriate additional qualifications - CF7 & HR1 or their equivalent.

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Are the negative things I hear true? 

Although the equity release market of today is a far cry from the one we had in the 1980's, you may still hear a lot of negative comments being made about equity release. 

We have found this usually stems from three main sources, 

1) Comments from those with no actual recent experience of equity release or qualifications to give advice on Equity Release.  

Sadly there is very little we can do about ill-informed comments from unqualified individuals, a few of which seem to filter into the mainstream media. Surprisingly, it is not uncommon for solicitors to be among equity releases detractors, however, when pushed for a recommendation of a better option they become tight lipped. This is wide spread throughout the legal profession and often stems from their experiences of the 1980's Equity Release Schemes. A solicitor's principle brief it is to ensure the contracts you sign are accurate and to alert you to any unbalanced or unreasonable contract terms. Many solicitors failed to spot and explain to clients just what they were agreeing to in the Equity Release contracts of the 1980's. As for being tight lipped in offering alternative solutions, solicitors are not routinely qualified or licensed to offer financial advice, so to recommend an alternative course of action would be professionally irresponsible. 

2) Those who have experienced poor advice or not been informed of all their options. 

It is terrible to hear when anyone who has been ill-advised. Unfortunately like any industry quality can vary, for this reason it is essential that you choose your adviser carefully. Make sure you check their regulatory status and qualifications. 

3) Potential beneficiaries i.e. those worried about what they may get from your estate when you pass away. 

This is any extremely important point as taking any equity release product will reduce the value of the estate that you can pass on to children or other beneficiaries. Ideally, you should discuss your plans with those likely to inherit your estate. Whilst many people are keen to leave their children or grandchildren an inheritance, avoiding doing equity release and struggling financially will not necessarily guarantee this in the event of your needing long term care. 

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There are two main factors that can reduce the value of your estate, 

Your choosing to spend your wealth to obtain a better standard of living or making gifts to loved ones for inheritance tax planning, either from the savings you have or equity released from your property. 

Your needing long term care and your savings and property being used to finance this care. It is a reality of modern retired life in Britain that nursing homes and specialist care facilities are extremely expensive. Even if you have every intention of leaving the house to your family, circumstances can conspire against you. 

What do I do next? 

If you are considering Equity Release, please feel free to contact us for Independent Equity Release Advice. We are able to provide home appointments across the whole of West Sussex - Brighton, Hove, Haywards Heath & Crawley, East Sussex, Surrey - Croydon Sutton, Reigate, Redhill,  South London - Wimbledon, Fulham, Chelsea and Hammersmith and Central London.

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"This is a lifetime mortgage. To understand the features and risks, ask for a personalised illustration."