Equity Release Council – Everything You Need to Know

Wondering about equity release? You’re not alone. Each month, over 7,000 people turn to us for advice on equity release, and we’re here to help you too. Understanding equity release can feel tricky, but don’t worry; we are here to make it clear. In this article, we’ll talk about:

• What equity release is.
• How to ensure your quote is realistic.
• The pros and cons of equity release.
• The role of the Equity Release Council.
• How to prepare for equity release.

The Equity Release Council is a group that makes sure equity release is safe and fair. They help homeowners like you to understand the ins and outs of equity release.

We know that releasing equity from your home is a big decision. It’s important to understand all the facts. We’ll explain things in a way that is easy to understand in order to help you make the best choice for you and your family.

Remember, you’re not alone on this journey. We’re here to guide you every step of the way. Let’s get started.

What is the Equity Release Council?

The Equity Release Council is a body that promotes high standards within the equity release industry. Its membership includes financial advisers and other financial service providers, equity release companies, solicitors, conveyancers and anyone else involved in equity release products and services. 

What Does the Equity Release Council do?

The Equity Release Council has an overarching aim to educate the general public on equity release options, while simultaneously ensuring members adhere to their guidelines and rules. By getting members to stick to these guidelines, they automatically increase the standard of services that homeowners considering equity release will receive. 

Is Equity Release Council membership compulsory?

No, the Equity Release Council is voluntary to relevant financial services and companies. But by joining the council, they become recognised as following the best practice principles and guidelines set down to protect homeowners. And for this reason, homeowners generally only consider equity release schemes from companies that hold an active membership. 

The no negative equity guarantee explained

As part of the Equity Release Council’s rules and regulations, any equity release product offered to a UK homeowner should include a no negative equity guarantee. This is a guarantee that states a homeowner will never owe more than what their home sells for from their estate, or when it is sold after moving into long-term care. 

For example, if you take out a lifetime mortgage and let the interest roll-up for over a decade, you could be in a situation where the total debt owed on the lifetime mortgage is more than what your home is worth (i.e. negative equity). The no negative equity guarantee states that the homeowner will never have to pay back more than what their home sells for.

This avoids any additional debts if they move into care, or it prevents having to pay more from the estate to clear the debt after death. 

» TAKE ACTION NOW: Find out how much equity you could release

The benefits of equity release

The main benefits of equity release are:

1. Access a lump sum or drawdown facility without having to make repayments
2. The money you receive is a loan, and therefore is tax-free
3. The money can be used for any purpose you wish
4. You continue to live in your home without rent and without the threat of eviction
5. As per the aforementioned no negative equity guarantee, you and your beneficiaries will never owe more than the value of your home once it is sold. 

What is the downside to equity release?

The major downside to equity release is that the terms of the loan can be financially unattractive and significantly reduce the amount of inheritance you pass on. 

For example, taking out a home reversion plan could unlock 20% of your home’s actual value in return for around 70% of the sale proceeds when it is eventually sold. If the home increases in value over time, the deal is even worse for you and the beneficiaries of your will.

Do I need a solicitor for equity release?

Yes, you will need to have your own solicitor to use an equity release scheme. It’s so important to have your own legal advice that the Equity Release Council has added it to their guidelines and rules. This means any legitimate lender governed by the Equity Release Council will expect you to have a solicitor as part of the process. 

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How much do solicitors charge for equity release?

Solicitors may charge a fixed fee and or a percentage of your loan amount for their financial services. The general rule is to expect to pay around 1.5% of your loan amount as a fee to an adviser. However, this is a general rule only and may not be the way your financial adviser or solicitor works. 

Things to consider

Equity release will involve a home reversion or a lifetime mortgage, which is secured against your property and will reduce the value of your estate and impact funding long-term care. Our equity release partner, Age Partnership provides a personalised illustration to explain the full details. The money you release, plus the accrued interest is then repaid when you die or move into long-term care. Advice is required before proceeding with equity release and any existing mortgage must be repaid. Age Partnership provide initial advice for free and without obligation. Only if your case completes would Age Partnership’s advice fee of £1,895 be payable. Other lender and solicitor fees may apply.