Is Equity Release Safe?

Find out if Equity Release is suitable for you

Equity release is a regulated mortgage product. Regulation sets rules for firms that advise on and arrange these products, but it does not guarantee that equity release will be suitable for every customer.

Johan Smit

That means there are rules in place for your safety and security. The Financial Conduct Authority sets rules for regulated mortgage advice and financial promotions. Equity Release Scotland must comply with these rules when providing advice and arranging regulated mortgage products.

A significant layer of protection comes from your own Solicitor. It is a regulatory requirement that you have independent legal advice on your Equity Release plan. Your Solicitor will run through many checks with you regarding your chosen plan ensuring your understanding of the process and making sure you are entering into the agreement willingly.

And finally, 100% of our cases are audited by our Compliance team, ensuring you have been given the correct advice throughout the process. Giving you, the customer, valuable peace of mind.

Equity Release plans had a poor reputation many years ago. This was due mainly to a mixture of poor advice, inferior products on offer, high interest rates and no or little flexibility. Today’s products have come a long way since then and are now extremely ‘consumer friendly’, possessing many features which have huge appeal to the many potential Equity Release customers considering such a course of action.

Important risks to consider:
Equity release will reduce the value of your estate and may affect your entitlement to means-tested benefits. Interest can roll up if payments are not made, meaning the amount owed can increase over time. Early repayment charges may apply. You should consider alternatives such as downsizing, using savings, family support, retirement interest-only mortgages, conventional borrowing, or doing nothing.

Frequently Asked Questions

Can I lose my home?

An ERS equity release plan, will at all times contain the following important features:

The right to remain in your home for life
No Negative Equity Guarantee
Fixed or Clearly Defined Interest Rates
The Right to Move
Independent Legal Advice
Qualified Financial Advice
Clear and Transparent Documentation
Suitability and Customer Understanding
Fair Treatment of Customers
Repayment Flexibility (where available)

What this means in practice for your adviser:

Equity release is demonstrably suitable.
Alternatives have been considered and documented.
The client’s vulnerability and capacity have been assessed.
Family involvement has been discussed (while respecting the client’s wishes).
The client fully understands the long-term consequences.
Independent legal advice is obtained.
Comprehensive records are kept to evidence the advice process.

For firms advising on lifetime mortgages, adherence to these standards sits alongside compliance with the FCA’s Mortgage Conduct of Business (MCOB) rules, which govern the regulated advice process.

Can I still leave an inheritance to my family?

Most lenders offer plans whereupon you can protect part of your remaining equity to ensure you leave an inheritance to your loved ones. It will reduce the amount you can borrow but whatever you decide, it will not affect the portion you have ringfenced in the ‘inheritance protection’ feature.

Can I move home after I take out an Equity Release plan?

Another main feature is that they offer you the option of portability. This means you can transfer the loan to another suitable property without incurring any financial penalty.

Will I leave debt to my family and loved ones?

Another important feature is the ‘No negative equity guarantee’. No matter what happens within the economic landscape in the future, you will never owe more than the value of your home.

Can I make payments to my loan?

The loan is normally repaid with any accrued interest with the sale of your home. However, many lenders allow you to use their flexible overpayment feature which typically allows you to pay up to 10% of the sum borrowed in any one year with penalty. Like a conventional mortgage, early repayment of the loan may incur an early repayment charge. However, there are lenders who offer fixed penalty periods which come to an end over a set time period so you can repay the loan without penalty. Your adviser will keep you fully informed of all the options available to you.

How much tax-free money can I unlock?

This is based upon the age of the youngest applicant, if a joint application, the value of your home, the type and location of your property and your medical history in some cases. Use our free online calculator as a guide to see what you may be able to release.

Some of the Lenders We Use From the Whole of Market

Product Features and Protections

These protections are provided by the lender/product, where applicable. They are not guarantees provided by Equity Release Scotland. Product features vary and depend on lender criteria.