Equity Release Advice: How to Find Guidance
You must receive equity release advice from an adviser with a specialist qualification before you’re allowed to take out any equity release plan. Finding a good equity release adviser, and knowing what to ask, is a must.
Using an equity release plan to unlock some of the money you have built up in your home is a big decision for both you and your family.
That’s why the Financial Conduct Authority (FCA) – which regulates both lifetime mortgages and home reversion plans – stipulates that all customers must get equity release advice before they sign up to a plan.
This advice must come from an equity release adviser with a specialist equity release qualification.
During the process, the adviser will need to ensure that equity release is the right choice for you. And if they recommend a specific product, they must 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 at the Equity Release Council, the trade body for equity release.
Its members have agreed to 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 to narrow down your search for an equity release adviser who is local to you.
Before you commit to an adviser, it is also important that you check whether they are 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.
If you already have an independent financial adviser helping you with your retirement, you should discuss the matter with them. However, they will only be able to offer you advice on equity release if they have the necessary qualifications.
And knowing that potential customers must get advice, equity release providers will also usually have their own qualified equity release advisers or will point you in the direction of how to find one.
Advice can usually be conducted face to face or over the phone.
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.
All advisors and brokers receive a fee from the lender they place your business with.
Make sure you understand if the advisor or broker you use works with one product, a panel of products or can offer a whole of market view.
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 to consider.
- 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 who can advise you on lifetime mortgages and home reversion plans, with an up-to-date knowledge of product innovation.
- Advisors must inform you about the impact an equity release product may have on inheritance, tax and benefits.
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. The Equity Release Council’s rules state 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.
Why you need equity release advice
The reason to get equity release advice is to make sure you fully understand what taking out a lifetime mortgage or home reversion plan will mean for you and your family.
While equity release may give you access to funds you couldn’t otherwise access, there will still be a cost that could drastically reduce the amount of money you are able to leave as an inheritance when you die.
With a lifetime mortgage, for example – the most common 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. A no negative equity guarantee will ensure you will never owe more than the value of the property, but it could potentially leave you with little or no money to pass on.
In addition to reducing the value of your estate, equity release could also affect the payment of any state benefits you receive.
Learning as much as you can about equity release, and then finding the plan that is best suited to you, are key.
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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
Tim draws on 20 years’ experience at Moneyfacts, Virgin Money and Future to pen articles that always put consumers’ interests first. He has particular expertise in mortgages, pensions and savings. Read more