Tag Archives: Equity Release Advisers

How Much Does it Cost To Set Up an Equity Release Mortgage?

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As with any type of mortgage application, there are fixed costs attributed with the setting up of the scheme. These are mandatory expenditures which are necessary in ensuring the equity release deals are legally watertight.

Firstly, before any legal work starts we need a professional assessment of the property to ensure it is adequate lending & to ascertain the properties true market value, assuming a reasonably quick sale. There is a cost to employing the services of a surveyor to prepare a valuation report on behalf of the equity release company. The fees borne on valuation depend on the properties market value & can range on a £250,000 property from a FREE valuation upto over £400. This valuation fee is paid on application, usually by cheque & payable to the lender concerned.

Secondly, the lender themselves will charge their own application fee & is usually deducted from the loan on completion. However, some lenders such as Just Retirement will actually allow you to add this to the loan. Please bear in mind, if this is the case you will pay compounded interest on this small charge too, for the rest of your life. To mitigate this, some applicants will deduct this from the equity release mortgage application. Again application fees can vary & range from no fee at all, upto £695 with LV=.

Thirdly, you will need the services of a solicitor to carry out the legal work & checks on your behalf. This must be a separate lawyer to that of the equity release provider as laid down by the SHIP rules. Some solicitors have formed ERSA (Equity Release Solicitors Alliance) & they themselves have set standards for equity release solicitors to meet. Practices such as Goldsmith Williams & Equilaw adopt these virtues.

Currently, companies such as Equity Release Supermarket have a fixed fee of £395+VAT & disbursements with a no completion, no fee, arrangement with both legal firms.

The solicitor is also responsible for checking title, obtaining signed documentation from the application & the liaising with the lenders solicitor to a satisfactory completion. The final job of the solicitor is to sign a SHIP certificate to confirm they have met the standards required & the client is fully aware of the contract they are entering into.

Finally, your independent equity release adviser will usually charge an advice fee upon completion. Some brokerages will try and charge you upfront for their service. Don’t. As with any service provided or goods bought, you should only pay upon successful completion.

Costs for equity release advisers can vary. The better brokers will assess the situation as they will receive commission from the lender they have placed your business with. Therefore, sometimes in lieu of commissions received this can be offset & sometimes even waived should commissions be sufficient in their own right. Nevertheless, fees can rise from £395 upto unfavourable rates of £1500 which should be avoided as the same service can be offered by companies such as Equity Release Supermarket who are more experienced & on a fixed cost basis of £695 for their recognised quality of client service.

Are Equity Release Schemes Safe and Could I lose My Home?

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Equity release schemes have been around in some format since the 1960’s. However, they have undergone significant changes to ensure that today’s equity release mortgages are complaint & trustworthy in the eyes of the over 55 marketplace.

The first steps towards recognition of the need for consumer protection came in 1991 with the launch of SHIP (Safe Home Income Plan). SHIP brought about a voluntary code of practice that must be implemented within any equity release scheme in order to achieve SHIP status: –

  • The flexibility to still be able to move house. Therefore the equity release plan must be portable
  • You can repay the equity release mortgage at any time, subject to potential early repayment charges
  • All plans must have the inclusion of a ‘no-negative equity guarantee‘ option

The no-negative equity guarantee provides the protection in an ‘over’ roll-up situation, where the equity release balance supercedes the value of the property in the future.

If this does occur the lender will invoke the no-negative equity guarantee and only ask for the property value on eventual sale. This provides the reassurance that no debt can be transferred onto the beneficiaries.

Since then, the FSA (Financial Services Authority) has become involved in the equity release market & taken all schemes under its wing.

Therefore in 2004, lifetime mortgages became fully regulated by the FSA & provided greater consumer protection. This led to only qualified equity release advisers being able provide recommendations to the general public.

Three years later in 2007, home reversions plans were amalgamated with lifetime mortgages resulting in both types of plans becoming regulated by the FSA.

With recent developments in the industry & SHIP now reforming itself into the Equity Release Council to have a stronger presence & stance within the post retirement market, then greater changes are to follow. This in turn will lead to greater consumer awareness of equity release schemes & their benefits to the over 55’s.