Important issues for you to consider

  • Is equity release right for you? Would moving to a less expensive property be a better way of releasing money tied up in your home? Have you got other nest eggs, such as premium bonds or savings, which you could use?
  • Not everyone is eligible for equity release. You need to own your own home and be at least 55 years old. Generally, your home needs to be worth at least £40,000 although different lenders and reversion companies have different rules. You may not be eligible if your home is built from anything other than traditional materials, such as brick or stone. And with some lenders and reversion companies you will have to borrow a minimum amount of money.
  • Choosing equity release will affect you over the long term. You need to be happy with the arrangements and confident that it suits your circumstances, now and in the future.
  • These days, people are living longer. If you take out an equity release plan too early in life, you may not have enough value left in your home to move to another property later on.
  • Using the equity in your home will affect the amount you are able to leave as an inheritance, so you may want to discuss this with your family. Your solicitor may also be able to help. It is also a good idea to make sure that your will is up to date.
  • Consider carefully which scheme is right for you. Compare different deals and lenders and reversion companies. They will not mind you asking questions and will respect your need to think things over before you decide.
  • We strongly recommend that you get expert financial advice. Some advisers charge you for advice, others are paid by lenders and reversion companies. You can also check whether the adviser is tied to a specific range of products or can recommend from the whole market.
  • The legal advice you receive should include a clear explanation of the terms and conditions of your loan.
  • As long as you are releasing equity from your main home, any lump sum or income you receive is tax-free. But if you choose to invest the money, you may have to pay tax on the returns on your investment. It is generally not a good idea to borrow money purely to invest it. A realistic rate of return on the investment is almost certainly going to be less than the interest rate you would be charged on a lifetime mortgage. Whoever advises you on a lifetime mortgage should not encourage you to borrow more than you need.
  • Ask about the effect of any lump sums or income on any state benefits you receive. You may want to discuss this with a financial adviser. You should also remember that the rules on benefits could change in the future.
  • Check whether the Financial Services Authority (FSA) regulates the lender or adviser that you buy your equity release product from. You can use the FSA's website to do this or phone the FSA on 0845 606 1234.
  • Since 31 October 2004, the FSA has regulated most mortgage sales, including lifetime mortgages but not reversions. This is because reversion schemes involve selling all or part of your property - no loan is involved. If your mortgage is regulated by the FSA, you will get clear information presented in a way that makes it easier for you to compare loans from different lenders. The FSA's rules say that:
    • information about prices in advertising and marketing information must be clear;
    • firms must make sure that they offer you a suitable equity release product based on the information you give them; and
    • the charges must not be too high.
  • Some providers belong to the Safe Home Income Plan (SHIP) group. SHIP was set up in 1991 to promote better value for customers. Its code of practice has the following three main principles.
  • Members should provide fair, simple and full explanations of their plans.
  • Your legal work should always be carried out by the solicitor you choose. Your solicitor must sign a certificate saying that they have explained the scheme to you.
  • The certificate must say clearly what is the main cost to your assets and estate (that is, the amount to be paid when you die and the percentage of your property being sold).

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