I think one of the most asked questions relating to equity release is whether it’s safe?
As I’ve stated in many of my posts about equity release, I considered my own position and did my research and concluded that for me, it was/is safe. As long as you understand how it works, and the advantages and disadvantages, then there is no reason why you shouldn’t use this mechanism to release capital in your home to fund your retirement.
Regulated Industry
The good thing is that in the UK, equity release is regulated by the Financial Conduct Authority (FCA). The Equity Release Council (ERC) also has a code of conduct to provide extra protection. You should choose a product from a company that is a member of the Equity Release Council. This is an industry body, and its members agree to abide by a voluntary code of conduct. This includes certain product standards.
When these standards are met, it means:
- You can live in your property for life, or until you move into permanent residential care
- You can move your plan to an alternative property (providing it is acceptable to the equity release product provider)
- You will never owe more than the value of your home when it is sold after you die or move into permanent residential care.
Use a Specialist Adviser
Always make sure you speak to a specialist equity release adviser, and that both the adviser and the equity release provider are authorised by the FCA. If something goes wrong with your plan, contact your provider first. They will have a complaints procedure to follow. If you’re not satisfied with the response, you can contact the Financial Ombudsman Service to see if they can help.
So the answer is……….
So I guess the answer to “is equity release safe” is yes it should be… If you do your research and consider your own circumstances. For me personally, the key was that interest rates at the time of the arrangement were fairly low, and I budgeted to pay the interest each year. Therefore, the amount of the loan would never grow above the initial amount, while at the same time as the property grew in value, the loan amount is becoming a smaller percentage of the value of the house overall.
