Is Your Equity Release Adviser Qualified?
Equity Release schemes are designed to enable you to free some of the money that is ‘locked’ your house in an easy way. They enable you to avoid having to move house in order to release the money, and they are reasonably straightforward to arrange.
However, you should still think carefully before committing to take out a loan on your home. The best way of helping you to understand the consequences of an Equity Release product is to involve your family or friends with the consultation. Not only will they be involved with the decision making process, they will also know what your liabilities will be in the future and how much money could be taken out of your estate when you move home or die.
You will need to get professional advice from an equity release consultant and this raises the question of how you check whether or not the consultant is appropriately qualified to advise you.
Check Their Advertisement
Equity Release providers should clearly state their qualification on any form of promotional material. This will mean that they are approved by the Financial Conduct Authority (FCA) to carry out this type of advice.
Check Their FCA Regulation Status
All firms that advise on equity release products are regulated by the FCA and so they must meet certain standards set by it. This includes ongoing Continuing Professional Development (CPD) in order to satisfy the FCA that they are familiar with changes in legislation and ongoing developments to the equity release market.
Check Their Clients
You should ask to speak to a few of their recent clients to find out what kind of service they received from the adviser. The best way to do this is to ask for ten or more names and contact details, and then choose three or four of these people on a random basis.
Roll-Up Mortgages Explained
A Roll-Up Mortgage is a type of Lifetime Mortgage that is commonly used for Equity Release purposes. With a Roll-up Mortgage, you agree to receive a sum of money which is secured against your house. You will need to pay any interest because the interest on your loan rolls-up until you sell your home and the Roll-Up Mortgage is repaid.
How Do Roll-Up Mortgages Work?
Once you have agreed a loan with a Roll-up Mortgage lender, you will receive a sum of cash or a monthly payment (commonly known as ‘income’). The amount of money you receive will depend on the value of your property and the terms of the loan.
Roll-up Mortgage Payments
A Roll-up Mortgage is different to a conventional mortgage in that you do not have to make any repayments on your loan, or the interest.
What does ‘Roll-up’ Mean?
Instead of making repayments, the interest on your mortgage accumulates each year on a compound basis, and this is what is referred to as ‘Roll-up’. Every year, your interest rolls-up so that you will owe more money.
Risk Of Roll-up Mortgage
Because the interest payments roll-up each year, there is a risk your loan will become very large in relation to the original sum taken out. The rough estimate for Roll-up Mortgages is that your loan will double in value every ten years. For example, a £10,000 loan might become £20,000 after ten years; and £40,000 after twenty years.
No Negative Equity Guarantee
There is a risk that the value of your Roll-up Mortgage becomes larger than the value of your home if it is held for a considerable amount of time. To prevent this from happening, Lifetime Mortgage lenders provide a ‘No Negative Equity Guarantee’ which means that you will not owe any extra money if the value of your loan is higher than your home is worth when it is sold.
Roll-up Mortgage Age Requirements
Most Roll-Up Mortgages are available to people who are aged 60 or more but many providers prefer you to be aged 65 which is the current retirement date.