Equity Release Companies to Avoid

The Secret To Why You MUST Avoid These Equity Release Companies
Contributors: Nicola Date, Katherine Read. Edited by Rachel Wait & Reviewed by Francis Hui
Equity Release Can Be a Dream Come True, But if You Get Caught Out by an Illegitimate Lender, It Can Be a Nightmare. Discover the Firms to Avoid in 2022…
TABLE OF CONTENTS

Equity Release Companies to Avoid


Without this crucial knowledge on equity release firms to avoid in 2022, you may find yourself tied into an equity release plan that you’ll regret!

While equity release solutions are safer than ever, unregulated lenders will only assist you take a step back rather than unlocking the key to your retirement aspirations.

Fortunately, we’re here to guide you through your first step towards equity release.

Through this article, you’ll learn:

  • What to look out for in an equity release company.
  • What’s an equity release company?
  • How to spot a regulated company.

EveryInvestor’s staff is dedicated to assisting retirees in pursuiting financial independence.

As a result, our research team has spent many hours discovering the unmistakable signals of equity release firms to avoid.

Here’s what we’ve found!

Before You Start Reading….

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What’s Equity Release?

Equity release is a loan for over 55s against the value of your estate while still having the option to live on the property for the rest of your life. 

What’s an Equity Release Company?

An equity release company is a lender that offers equity release plans.

The most common lenders of equity release mortgage products are later-life mortgage providers, banks, and building societies.

What to Avoid in an Equity Release Company?

You must avoid equity release companies that are unregulated and lack important features set out by the Equity Release Council1.

Here’s more information:

Not a Member of the Equity Release Council

The Equity Release Council will approve & register leading companies in the UK that offer equity release advice and schemes.

Not Authorised & Regulated by the Financial Conduct Authority.

If you’re using an equity release company, it’s crucial you ensure they’re authorised and regulated by the financial conduct authority 2

This is because

All equity release companies need to adhere to strict regulations and need to be authorised to be classified as legitimate and safe providers.

No Downsizing Clause

Ensure your chosen equity release company has a downsizing clause as it allows clients to pay back your equity release early if you relocate, without suffering any early repayment penalty. 

No Voluntary Interest Payments

All equity release companies should provide voluntary interest repayments.

This clause was added to the ERC’s code of conduct for new plans as of 31 March 2022.

No No-Negative Equity Guarantee

All schemes that comply with the Equity Release Council’s product standards must have a no negative equity guarantee. 

Simply put…

This ensures that neither you nor your estate will ever owe more than the property is worth when it’s sold.

No Capped or Fixed Interest Rates

Uncapped or unfixed interest rates may cause you to owe more money than intended after your loan.

This is why all equity release providers must have interest rates that are set at the outset and don’t need to be renewed; as they are fixed for life.

Alternatively, they must be a cap.

Fixed equity release interest rates are established initially & don’t need to be updated, regardless of the length of the mortgage.

Capped interest rates may fluctuate, but only to a set point.

High Early Repayment Charges

You may be eligible for an early repayment charge if you end your equity release loan before it’s specified in your contract.

These shouldn’t be more than 3% to 5% of the total equity release loan amount.

No Prior Assessment of Your Circumstances

All equity release advisors are required to assess all of your circumstances when you apply for equity release.

It’s a lengthy process, and there are several factors such as your age, health, and special conditions that determine what equity release scheme is best for you.

This is why

You should insist that your equity release company takes the time to properly examine your situation and work closely with a financial adviser.

Never trust a lender that is willing to instantly deposit money into your account. 

No Right to Move to Another Property

You should be able to move whenever you choose under any equity release plan approved by the Equity Release Council.

In such cases, you can port your plan if the new home is approved by your lender.

Common Questions

Who Are the Equity Release Council?

Who Is The Best Equity Release Plan Provider?

Whom Should I turn to For Equity Release Advice?

Conclusion

If you’re approaching retirement age, you should consider equity release, as it can be beneficial if you require the means to supplement your income.

With these key signs of companies to avoid, you can do so with confidence. 

However, equity release products aren’t the only available option, so always review all the alternatives and consult a financial advisor before making any final decisions.

How Much Can You Release?

Use the FREE Calculator Below 👇

 

Equity Release Calculator

Value of Your Home?

50000

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It’s VERY FAST, takes just 8 seconds

Editorial Note: This content has been independently collected by the EveryInvestor advisor team and is offered on a non-advised basis. EveryInvestor may earn a commission on sales made from partner links on this page, but that doesn’t affect our editors’ opinions or evaluations. Learn more about our editorial guidelines.