Equity Release Schemes
The UK equity release market is basically made up of two types of equity release plan – Lifetime Mortgages and Home Reversion Schemes. The most popular plan is a lifetime mortgage, where the homeowner retains ownership of the property but the property is charged with the repayment of a loan or mortgage, which accrues rolled up interest over the period of the homeowner’s lifetime.
Equity Release Schemes – is it right for you?
To help customers decide whether equity release is right for them, a number of companies provide a free equity release calculator to show a rough estimate of the amount of equity that could be released.
The other type of plan is a reversion plan – where the homeowners sells all or part of the property to the equity release provider for an agreed sum, in return for a right to remain there rent free.
The UK equity release market is now fully regulated. Both lifetime mortgages and home reversion plans now fall under the remit of the Financial Services Authority (FSA). Prior to FSA regulation, many lenders signed up to SHIP (Safe Home Income Plans), a voluntary code of conduct that provides a number of guarantees www.ship-ltd.org.
SHIP was formed in 1991 in an attempt to improve the equity release market and its previous poor reputation. The SHIP guarantees include a guaranteed right to remain living in the property which is the subject of the equity release, either for life or until entry into long term care.
In addition there is a vital No Negative Equity Guarantee – which essentially guarantees that the amount to repay the equity release plan on death or entry into long term care can never exceed the value of the property itself, and so no debt can ever be left behind for beneficiaries of the equity release borrower.
For more information and guidance on Equity Release, please telephone Carl Fletcher on 0845 074 3491 or email email@example.com