Where and how to seek equity release advice
You must receive equity release advice from an adviser or broker with a specialist qualification. Here’s how to find the best guidance for you.
Using an equity release plan to unlock some of the money built up in your home is a big decision. While it may give you access to funds you couldn’t otherwise get, there will still be a cost that could drastically reduce the amount of money you are able to leave to your family when you pass away.
With a lifetime mortgage, for example, the most popular form of equity release, some or all of the interest rolls up during the life of the loan, meaning the longer you live, the bigger the debt will grow. No negative equity guarantees ensure you will never owe more than the value of the property, however, it could potentially leave you with little or no money to pass on.
For these reasons, the Financial Conduct Authority - which regulates both lifetime mortgages and home reversion plans - stipulates that all customers must get equity release advice before they sign up.
This advice must come from an equity release adviser or broker, with a specialist equity release qualification.
During the process, the adviser will need to ensure that equity release is right for you and if they go on to recommend a specific product they need to check that it is appropriate for you.
Where to find an equity release adviser
A good place to start your search for an equity release adviser is with the Equity Release Council, the trade body for equity release.
This means that they will abide by the organisation’s code, in addition to the rules laid down by the FCA. You can use the ‘find a member service’ on its website.
Before you commit to any adviser it is also important that you check it is registered with the FCA. This ensures that if you encounter problems you will have recourse to the Financial Ombudsman Service, which can investigate complaints on your behalf and potentially arrange for compensation to be paid if it finds in your favour.
Advice can usually be conducted face-to-face or over the phone.
If you already have an independent financial adviser helping you with your retirement, you may wish to discuss the matter with them. However, they will only be able to offer you advice on equity release if they have the necessary qualifications.
How much does equity release advice cost?
How much you pay will depend on the adviser or broker you select. Some firms may charge a flat fee (in the region of £1,000) or a percentage of the loan size (likely to be around 2%).
Some brokers may not charge an advice fee at all, but they may only work with a limited panel of providers.
The debt charity, StepChange, also offers a free equity release advice service.
Questions to ask your equity release adviser:
- Are you and the providers you recommend members of the Equity Release Council?
- Are you wholly independent? Find out if advisers are tied to one or a number of providers or have access to the whole market.
- Are you regulated by the FCA?
- Will you discuss alternatives to equity release? Advisers should tell you if equity release is not suitable for you and mention other options you may have.
- How much will you charge for advice?
- What will the total cost of equity release be? To avoid any unwelcome surprises an adviser should tell you about other charges you may have to pay such as legal fees and arrangement fees.
- What sort of equity release plans do you advise on? You want an adviser that can advise you on lifetime mortgages and home reversion plans, with an up-to-date knowledge of product innovation.
Legal equity release advice
In addition to financial advice, if you want to take out an equity release plan, you will need to get independent legal advice from a solicitor, with the Equity Release Council’s rules stating that all providers signed up to the scheme must ensure that both lender and customer use different solicitors to avoid any conflict of interest.
As a customer, your solicitor will ensure you understand the implications of equity release and that you haven’t been put under any pressure during the sales process.
They will also handle the legal logistics from checking title deeds and buildings insurance to arranging completion and money transfer dates.
Your adviser or broker may have recommended solicitors that you can approach. However, you can also select your own. Again, the Equity Release Council’s website allows you to search for solicitors offering equity release advice in your area.
How much does equity release legal advice cost?
Fees will vary widely between legal firms. As a result, it’s important to shop around to not only ensure you get value for money but also that you feel comfortable with your appointed solicitor.
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Rachel Lacey is freelance journalist with 20 years experience. She specialises in personal finance and retirement planning and is passionate about simplifying money matters for all. Read more