Tag Archives: FSA

How Far Has The Lifetime Mortgage Evolved?

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The concept of lifetime mortgage to release the equity held in one’s property initially started somewhere in the mid of 1960s. It is based on a simple process to use the value of your property without having to move out of it. These schemes were not as popular then, as they are today because they were neither systematic nor regulated, which gave birth to several poorly devised products called Shared Appreciated Mortgages that made it look like a poor product in those times. Even today, we cannot forget the stigma that still lingers on amongst today’s elderly population in 1990s.

The government understood the need of regulating equity release schemes to provide consumer protection after the sad events that happened in 1990s. There was a need to protect the consumer rights which motivated the introduction of Safe Home Income Plan, abbreviated as SHIP. It laid down certain voluntary measures to be followed by the institutions offering these lifetime mortgage schemes to get their schemes included under the scope and definition of SHIP. Ship has now been superseded by the Equity Release Council (ERC) which lays down the precedents by which all equity release firms & advisers must adhere to.

These new equity release schemes that meet the ERC criteria have to leave the consumer with the right to repay the loan at anytime which secured against the mortgage of the property, if they want, although against some early repayment charges may be levied. It is even mentioned at www.equityrelease2go.com that all the lifetime mortgage plans must have the inclusion of no negative equity guarantee, so that the consumers need not worry about the liabilities stretching beyond the value of the property. With the increasing flexibility and portability, the consumers even got the rights to move to a houses freely and either transfer the equity release scheme or repay it.

All these schemes are today regulated under the guidelines laid down by FSA as well as Equity Release Council. In 2004, the Financial Services Authority fully regulated these schemes as well as the institutions offering these schemes so as to guard the interest of consumers at large all across UK.

Home reversion plans were merged with lifetime mortgages under the guidance of FSA in 2007. Today, these schemes offer greater flexibility to the consumers, enhanced plans for people suffering from several health ailments as well as the options of only paying interests through the interest only lifetime mortgage plan.

Lifetime mortgage schemes have evolved today as one of best products available, in the right place, at the right time to enhance the lifestyle of people even beyond the age of 55.

What can I spend the proceeds of an Equity Release on?

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Equity release is a way of turning the value tied into your home into cash. It is becoming increasingly popular today and more and more people want to use this option to use some of their home equity to generate additional income during retirement. There are many equity release plans available from several different providers.

Retirement is known as the golden period of life, when one is finally free to do what one wants. But ironically, it is during retirement that cash flow can be a problem and this can limit one’s freedom in so many ways. A pension is generally the main source of income during retirement, which may not always be enough to maintain a comfortable lifestyle. This is why more and more homeowners are considering equity release plans as a way to supplementing their income.

Some people have enough income to support their day to day life, but the problem arises when there is a relatively big one-off expense that needs to be made. This could be anything from home improvement work, to a dream holiday! The released equity can be taken in regular monthly installments or as a lump sum and one off expenses is another reason why people consider releasing equity from their home.

There is absolutely no restriction on what you can use the money for. The proceeds you get from equity release plans are tax free and could be used for a variety of purposes, depending on personal needs. Some common uses of equity release proceeds are home improvement works, buying a new car, investing in a second property or paying for care in your home. Another common use is to gift money to children and family or as supplementary income.

Equity release plans are many and varied. As the concept caught on and became popular, more providers entered the market and equity release schemes became flexible. Increased competition among providers has resulted in a customer-friendly market, with favourable interest rates and better terms of contract. Equity release schemes are now fully regulated by the FSA (Financial Services Authority) which was not always been the case.

Equity release plans can be a good way to generate usable cash from the equity built on your property without selling the house. Obviously, equity release does have some potential risks and disadvantages, and is not for everyone. To understand more about how equity release works and whether it’s right for you, seek the advice of an independent financial expert.

Are Equity Release Schemes protected?

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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.