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Equity Release Advisers – Complete Review

Equity Release Advisors

For free and impartial money advice and guidance, visit MoneyHelper, to help you make the most of your money.

What are equity release advisers and how much does it cost to get equity release advice? We explain the role of an equity release adviser in the UK and answer your related questions in this guide. Everyone should receive professional equity release advice before making an application, so you’re going to want to know more. 

What is equity release and how does it work?

Equity release is an umbrella term for two types of financial products exclusively available to outright homeowners over the age of 55. These two financial products are called lifetime mortgages and home reversion plans, which we will explain in detail shortly. 

To be eligible to apply, you must meet the aforementioned age requirement and be releasing equity from your main UK residence. The property will need to meet a minimum valuation with no debt secured against it, such as a residential mortgage which should have been paid off prior. 

In a nutshell, equity release allows the senior homeowner to access some of their home equity as a tax-free lump sum or drawdown loan without having to make any monthly repayments. Sounds too good to be true? Well, the loan is only repaid after they die or move into care, at which point their home will be sold and some or all of the sale money will be used to repay the debt. 

A lifetime mortgage or home reversion plan should only be considered from a lender that is authorised and regulated by the Financial Conduct Authority, and only after receiving equity release advice. 

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Lifetime mortgages vs home reversion plans

More people use a lifetime mortgage than a home reversion plan, which may boil down to how the debt steadily grows with a lifetime mortgage or instantly grows with a home reversion plan. It may also have something to do with accessibility. 

A lifetime mortgage lets the senior homeowner get a loan worth up to 60% of their property value in a best-case situation. This loan can be taken as a tax-free cash lump sum or as a drawdown facility, but it will be charged with rolling monthly interest. The interest applied does not need to be repaid; it gets added to the total owed each month which is what makes the debt grow bigger. Upon death or moving into care, the total debt is repaid through the sale of the property. 

Home reversion schemes exchange a percentage of the property equity as an instant loan for repayment of a greater percentage of the property’s future sale money. For example, you might decide to take out 25% of your equity on a £150,000 home, giving you £37,500. But in return, you must give the lender 60% of the property’s sale value. If the property value increases by 10% by the time the debt needs to be repaid (after death or going into care), your £37,000 loan will cost you £99,000 in the end. 

Why do people choose equity release?

Senior homeowners choose to use an equity release plan to access a lump sum or drawdown that makes their retirement more comfortable. This cash reserve may be used for an array of purposes, not limited to home improvements, frequent holidays and trips abroad, private medical services, helping family with their finances, or just improving the general quality of life.

What is the downside to equity release?

The downside to equity release is just how expensive taking out a lump sum equity release loan today can become. You can expect to pay double or more back to the lender, whether you use a lifetime mortgage or reversion plan. And by paying so much for your loan in the end, you will not pass on as much of your wealth to family members when you die. People without children often find equity release an easier decision for this reason. 

How do you know if equity release is right for you?

The best way of knowing if equity release is the best option for you is to speak with an equity release adviser. They can look at your personal situation and finances to help you compare equity release options with alternative methods of securing credit or creating financial security in retirement. 

What is an equity release adviser?

Equity release advisers are financial advisers that specialise in equity release. There are many financial advisers who do not deal with equity release clients on a regular basis, but then there are financial advisers who predominantly or exclusively work in the equity release sector, helping people understand lifetime mortgages and so on. 

Is getting equity release advice mandatory?

It is mandatory to receive equity release advice before making an application or signing up for any equity release product. Taking out a lifetime mortgage and comparable schemes is a huge decision that could have implications on your finances for the rest of your life, and will affect any estate beneficiaries as well. This is why it is mandatory to speak with an equity release adviser first. 

Independent equity release advisers

Because it is mandatory to receive some level of financial advice before applying for a lifetime mortgage, many banks and equity release companies provide their own financial advice services in-house. These advisers work for the lender but must never deceive or pressure you into taking out one of their company’s products. They must explain alternative options and fully explain the costs associated with their lifetime mortgages and other plans. 

The majority of financial advisers working for lenders are excellent at their job and do not give misleading information or apply pressure. But you may want to consider independent financial advice services for additional peace of mind and to avoid any equity release mis-selling

What do equity release advisers do?

Equity release advisers offer a service that:

  1. Helps you to understand equity release, including the details of lifetime mortgages and reversion plans.
  2. Explains the full costs of equity release.
  3. Explains the implications of equity release on other things, such as inheritance tax and means-tested state benefits.
  4. Discusses future plans, such as downsizing.
  5. Assesses your personal finances for alternative options.
  6. Answers any questions you may have.

The job of an in-house and independent equity release adviser is the same, but there may be some additional services offered by independent advisers. If you choose an independent adviser, they may also offer to:

  1. Help you search for equity release providers and specific deals, just like a mortgage adviser would try to broker deals
  2. Help you prepare documents and make an initial application.
  3. Help you to find an equity release solicitor when required. 

How much does equity release advice cost?

Equity release advice is not usually provided for free, but some lenders may offer you a free initial consultation if you are considering one of their equity release products. 

Most equity release advisers charge a percentage of the loan you want to take out, ranging from 1-5%. So, if you were after a lifetime mortgage to release a £100,000 lump-sum loan, the equity release adviser would charge anywhere from £1,000 to £5,000 for their services. 

A limited number of advisers charge a fixed fee including VAT for their service. For example, at the time of writing, one equity release company called One Family charges a flat £950 for all advice rather than a percentage of the loan. This can be beneficial if you are taking out a larger equity release loan. 

How to find good equity release advisers?

There are lots of companies in the UK that offer equity release advice. It is better to seek out services that specialise in equity release, rather than generic advisers who do not work in the equity release industry each day. Moreover, you may want to search for advisers that are members of the Equity Release Council. This should ensure you receive a fair and professional service. 

What is the Equity Release Council?

The Equity Release Council is a voluntary membership group for all companies working in equity release. Most of their members are equity release companies and lenders, but their membership cohort also includes equity release advisers.  

By joining the Equity Release Council, these financial services companies must follow additional rules and guidelines created by the group. All of these rules have been made to provide homeowners with additional protection and peace of mind. Any member is also guaranteed to be a legitimate company because the business must be authorised and regulated by the Financial Conduct Authority to join, which is vetted by the council itself. 

And these are the top reasons why it is better to look for equity release financial services from members of the Equity Release Council. 

Did an adviser mis-sell you a lifetime mortgage?

If you believe that any equity release adviser mis-sold you a lifetime mortgage because they never explained the full costs or suggested more suitable alternatives, you can make a complaint to the Financial Ombudsman Service and potentially get your money back! 

Do I need a solicitor for equity release?

The Equity Release Council makes it mandatory that you receive legal advice as well as financial advice, which is in part to protect you from any scam or rogue equity release advisers. You can never be forced to use a specific legal company, but the company must have at least four lawyers as part of the council’s rules and regulations. 

What does an equity release solicitor do?

The equity release solicitor works on your behalf in a legal capacity and will perform a range of tasks throughout the process, such as title deed checks and requisition. 

How much are solicitor fees for equity release?

On average you should expect to pay around £1,000 including VAT in equity release solicitor fees. 

How much does it cost to arrange equity release?

Arranging equity release can cost thousands of pounds, which should be factored into your decision to use it or not. You’ll have to pay equity release adviser and equity release solicitor fees, and possibly other arrangement costs related to valuing your home etc. 

Want to know more about equity release advisers and solicitors?

If you have other questions about equity release advisers and solicitors, or further questions about equity release products, do not hesitate to search MoneyNerd for our other guides – you won’t be disappointed! 

We just published over 100 articles all about equity release to help UK seniors understand these complex products in clear language with simple examples. Enjoy them for free now! 

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