While equity release can be a good way for older people to access money to support later life, it’s understandable that they’d want some reassurance beforehand. So, what safeguards are in place to protect borrowers?
The Equity Release Council
The Equity Release Council (ERC) aims to ensure that its members act with integrity and transparency when offering high-quality products and services to customers. All members of the council must abide by its rules, guidance and standards, which include exercising due skill, care and diligence while always acting in the best interests of clients. In addition, all members must comply with the Financial Conduct Authority’s rules in order to protect consumers and financial markets.
Consumers should look for lenders that are members of the Equity Release Council as it will give them the peace of mind that there are safeguards in place to protect them. As members of the ERC ourselves, we have to use contracts that are already approved by the body and adhere to the following product standards.
Right to remain in your property
One of the most important things regulated by the Equity Release Council is clients’ rights to remain in their home, either for the duration of their life and until they are moved into long-term care. All equity release products should have this provision in their supporting literature – and if it isn’t evident, the literature should explain why the standard is not met.
Right to move to another property
Borrowers should also have a right to move home and transfer their loan, as long as the property they’re moving to meets the lender’s lending criteria. In other words, the new property will still need to provide an acceptable level of security for the equity release loan.
No negative equity guarantee
The ERC also stipulates that any equity release product should offer a “no negative equity guarantee”. This protects borrowers when the outstanding balance of their loan plus the accrued interest exceeds the value of their house when it is sold, ensuring that neither the homeowner or their family will be liable for any subsequent remaining debt.
Independent valuations and legal advice
To ensure there is no conflict of interest, every equity release lender has to get an independent property valuation. Similarly, before agreeing to an equity release plan, a client must take independent legal advice, involving a face-to-face meeting with a solicitor. A professional equity release firm will provide a certificate outlining the obligations of both parties, which should be signed by both the borrower and their solicitor.
Written information and explanation
The ERC’s Statement of Principles outlines that customers will be provided with a simple, fair and complete presentation and explanation of their equity release plan. It will include information on the costs of setting up the plan, how the plan may be affected by changing house values, what happens if a client wishes to move to a new property, plus any tax implications.
At Premier Equity Release, our open and clear policy ensures that you will always be given best advice including when an equity release plan may not be your best course of action. As members of the Equity Release Council, you can trust us to deliver a professional, honest service, so feel free to get in touch today.