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Mark Gregory, Founder and CEO at Equity Release Supermarket
www.equityreleasesupermarket.com
Tel: 0800 678 5955
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Question
Where can I find the best equity release deals?
How do I find the best value deals for equity release and how will I know the best ones for my own circumstances?
My wife and I took out a mortgage from our building society when we bought our home 30 years ago. Now we would like to release some equity but wondered how to go about this as our bank does not offer this option and advised me to seek financial advice.
Answer
A term that is becoming increasingly common to describe all your borrowing options, pre or in retirement, is ‘later life lending’.
This includes equity release (either the most popular lifetime mortgages or less common home reversion schemes) as well as retirement interest-only (RIO) mortgages and retirement mortgages.
If you would like to learn more about each of these, the interest rates they offer as well as their features and benefits, then there are only two independent websites that offer this functionality.
Equity Release Supermarket provides lots of research information, guides, videos, calculators and comparison tables across the whole of the later life lending market and Compare Equity Release is designed for those that have a better understanding of equity release and want to compare all the deals available in the market.
Once you’ve had chance to look at the available deals, then the next step is to talk to an expert, independent, whole of market adviser. They will discuss your requirements, both now and in the future, and formulate a personalised recommendation from a range of products across the whole of the later life lending market.
As your bank correctly pointed out, you do need specialist financial advice to take out equity release and this is a requirement of the Financial Conduct Authority (FCA).
All of our advisers at Equity Release Supermarket are highly qualified, experts in their field and they will be able to guide you through the whole process and find the right deal for you, both now and in the future.
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Question
Is equity release safe?
My partner and I are umming and ahhing about taking out equity release. We like the idea in principle but we have heard so many horror stories from friends and family and therefore wondered if there are any safety nets?
Do we have any redress if, for example, things went wrong and we had a problem with negative equity or the like?
Answer
I’m sorry to hear that you’ve heard horror stories about equity release and in my experience, as a qualified adviser myself with over 20 years’ experience, the majority of these come from the media, using examples from long before the equity release market became regulated by the Financial Conduct Authority (FCA).
The later life market is now highly regulated, with all advisers having to become qualified to provide advice in this area. Other changes over the years have come from the development of the products themselves and the ‘new breed’ of plans were available which offer a wide range of features and benefits, allowing you to tailor a plan to meet your specific needs.
It’s also worth mentioning that interest rates are now at an all-time low and are fixed for life, which offers additional peace of mind and security for you beneficiaries.
The reality is that equity release is one of the most regulated financial services product there is and there are a number of reasons for that, starting with the FCA itself which regulates this market.
Secondly, you must seek financial advice from a suitably qualified adviser that holds the appropriate equity release qualification. Lenders will not accept an application without advice being provided.
The adviser ideally should be from a member of the Equity Release Council (ERC), the industry’s trade body and a full list of these advisers can be found here. All our advisers at Equity Release Supermarket are members of the ERC.
The ERC also insists that its members (both advisers and lenders) follow a strict Code of Conduct. For example, all equity release plans must come with a no negative equity guarantee – which to answer the question you raise – means that your estate will never be out of pocket and have to meet any shortfall if the amount to be repaid when your equity release plan ends, is more than the value of your property.
The ERC also insists that you have at least one, face to face meeting with your own, independent solicitor, which ensures that your legal interests are taken care of and that your solicitor is comfortable that you fully understand your decision.
The financial advice process is also extremely thoroughly documented and if you do decide to go ahead, the documentation that your adviser prepares for you prior to making an application with a lender – your Key Features Illustration (KFI) and Suitability Report – will detail your financial situation, your financial goals, how you plan to use your equity release money, the plan itself and why it has been recommended to you as well as what the final repayment could be when your plan ends.
We also actively encourage you to include your family in the process so that you are all totally aware of, and happy with the financial decision you are making. Importantly, if we belief that equity release isn’t right for you, we will say so.
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Question
Family dispute over later life finances
I am writing on behalf of my husband whose Mum and Dad are divided over whether to take out equity release! To add to the problem, my husband is totally up for it as an idea and is well and truly on ‘Team Equity Release’ while his brother is on the other side of the fence.
Therefore, the family is split! Is there a place where we can get independent advice and someone ‘neutral’ to act as a kind of mediator? I have heard there are equity release advisers but I am concerned they might encourage them down the route of taking out the product and we really need someone to look at the whole picture and offer a broader and more balanced perspective taking into account the reservations as well as the positivity.
Answer
The simplest way for your husband’s Mum and Dad to decide if equity release is right for them is to speak with a whole of market, equity release adviser – such as one of our advisers at Equity Release Supermarket.
Given the situation with the family being split on this matter, we’d always suggest all parties are involved in the process. From experience, and given the Covid situation at present, this can be ideally served via a Zoom meeting with all parties in attendance from their own respective locations.
Then all cards can be placed on the table and any questions, concerns and thoughts can be aired with the adviser present – who can hopefully allay any fears over the decision to be made.
I’d like to reassure you that our advisers are completely independent of any particular lender, as a company we are not tied to any provider and are one of the few, truly impartial and whole of market advisory services.
Advisers will be able to explain all the pros and cons of equity release to you and your family and then it is up to your Mum and Dad to decide whether they would like to proceed. Importantly, any adviser will discuss all their available options, whether that is equity release or not.
All calls and meetings with one of our advisers are free of charge and you are under no obligation. In fact, you only pay for advice with us once you plan is complete, and your money is in the bank.
If you’re not yet ready to take that step, then our website is full of information, videos and calculators to help you learn more about equity release and the other later life lending options.
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Question
Switching to a new deal
I have a quick question about equity release rates, please. Do you know whether there is a fixed time period attached to products – for example a two or five year deal – into which customers are bound? I would like to know whether I could switch deals after a certain amount of time to take advantage of any rate reductions or competitive options.
Answer
Lifetime mortgages are the most popular type of equity release plan and they work very differently to the residential mortgages with fixed terms that you are used to. Lifetime mortgages almost exclusively come with interest rates that are fixed for life.
So, no matter what happens in the future, the interest rate applied to a lifetime mortgage never changes. We find that this gives our customers added peace of mind, as they know exactly how much will be payable at any point in the future.
I must point out that lifetime mortgages are designed to run for the rest of your life – not necessarily over the short term, as the penalties for early repayment can be as high as 25% of the amount borrowed. Let me explain more…
Dependent upon the lender concerned, lifetime mortgages can either come with variable or fixed early repayment charges (ERC’s). Variable ERC’s are normally associated with the movement in government gilts. As their rates fluctuate, they’re not suitable if you are considering repaying a lifetime mortgage early, simply due to the fact the future penalty, when taking out the plan is an unknown.
On the other hand, and more lenders are starting to move in this direction, we are seeing fixed ERC’s which offer a pre-determined penalty over a set number of years. With lenders such as Canada Life, these ERC’s can be as short as eight-years. After this period the plan can be repaid with no penalty.
Therefore, we are seeing people with similar shorter term goal as yourselves, considering equity release as an option. This could be to repay the loan completely, or provide them with the option to switch to another plan in the future, if it is going to be financially beneficial for you to do so. The main consideration is, is the cost of switching lower than the cost of staying?
At Equity Release Supermarket, we conduct an annual review with our customers and a full ‘switch analysis’ to see if it is indeed in our customers best interest to switch plans.
We also offer a ‘switch plan’ calculator on our website, which is free for you to use. While it is intended for those that already have a lifetime mortgage in place, you may find it useful to get a better understanding of the potential ‘break even’ and ‘switch point’ in the future and how much money could be saved by moving to another plan with a lower interest rate over time.
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