Are Equity Release Schemes protected?

Equity release schemes have come a long way since they were first introduced in the market. Equity release plans proved to be a very popular concept, and it is their popularity that paved the way for new, improved and more flexible options. Equity release mortgages today are also better regulated when compared with older mortgages.

The popularity of equity release is due to a very real need in society. Living costs have gone up considerably, as have property prices. In this light, pensioners who own homes, but not have enough cash flow can find equity release to be a good solution. It allows homeowners to increase their income during retirement, without the need to sell the property and move into a different place.

The Financial Services Authority (FSA) is a body that regulates financial services and products. The FSA aims to maintain transparency and fairness in communication related to financial services, including advice issued to customers. It also aims to eradicate financial wrongdoing. Equity release schemes and mortgages today are completely regulated by the FSA. Equity release customers can seek support and protection from the FSA.

A common concern that people have with equity release mortgages is the potential risk of negative equity. Due to compounding interest built up over a long period of time, an equity release debt can become quite large compared to the amount borrowed. When the house is sold, if the amount owed is higher than the sale value of the house, a negative equity is created.

As the equity release market has matured and become more competitive, it has also become safer for customers. Safe Home Income Plans is a self regulated body that aims to serve customers by making the terms of equity release mortgages more transparent and safe. For instance, all SHIP equity release schemes offer a no negative equity assurance. This means that any negative equity does not need to be repaid to the lender.

Solicitors that can handle all the paperwork related to an equity release application, as well as provide specialist advice. The equity release solicitors’ alliance  ERSA, is a charter of specialist solicitors dealing with equity release mortgages. There is a wide variety of equity release schemes available in the market. It is important to seek professional independent expert advice regarding equity release. Independent experts can provide guidance on the potential risks and advantages of equity release for you.