Equity release is a scheme in which many have taken or are considering on taking after they retire however, some do not know all the details to the plan. There are various myths and rumours about equity release which aren’t actually true. Because of these myths, some of the older generation in which are entering retirement are too scared to use this scheme and miss out on all the benefits of the scheme.
One of the myths of equity release is that you will lose your home. Andrea Rozario, chief executive of Ship says: ‘The number one guarantee of the Ship Code of Conduct is that equity release customers will be allowed to remain in their property for life, or until they move into long term care, provided that the property remains their main residence.
‘With a home reversion plan the customer is able to sell all or a percentage of their property with the right to remain in it, rent free, or for a small nominal payment, for the rest of their life, or until they move into long term care.’
Another myth that is constantly brought up about equity release is that your children will then be forced to pay off your bills when you pass away. Andrea Rozario also played this claim down by explaining that ‘All SHIP members provide a ‘no negative equity guarantee’, which means regardless of the value of the home or how long the customer lives, the loan plus interest will never be a debt for their families.
However taking out an equity release plan will leave the customer’s family with a reduced, or possibly no inheritance when the planholder dies. The customer and their family need to feel comfortable with this possible outcome, which is why SHIP encourages a customer’s family to be involved with the decision to take out an equity release plan and why SHIP insists the customers always take professional financial advice and use their own legal adviser.’
The most commonly spread myth surrounding the scheme is that equity release is simply unsafe and isn’t regulated. Andrea Rozario says that ‘’Equity release advice and lending is regulated by the Financial Services Authority (FSA). In addition SHIP members provide additional safeguards and protections
The Code stipulates that a customer must be given independent legal advice, and must also take professional financial advice.
‘This means that all of the benefits and limitations of the product will be explained, together with any obligations that they might be under.’