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Mis-sold Equity Release. Is Equity Release Still A Popular Option In 2024?


Equity release has become a significant option for homeowners in the UK, especially among the older population looking to supplement their retirement income. The market has seen a steady increase in popularity, with more homeowners turning to equity release as a means to support their financial needs or assist family members.

The rise in equity release is driven by various factors, including the need for additional retirement funding and the desire to help younger generations get onto the property ladder. It’s also worth noting that the equity release market has evolved with more products and lower rates, making it more accessible and attractive. 

However, it’s important for individuals to consider the long-term implications and risks associated with equity release.

For a more detailed understanding of the current trends and statistics, you might want to look into recent reports and analyses that provide a comprehensive overview of the equity release market in the UK.

Equity release in the UK allows homeowners, typically over the age of 55, to access the value tied up in their property without the need to sell or move out. Here’s a brief overview of how it works:

Lifetime Mortgage:

  • This is the most common form of equity release.

  • You take out a loan secured against your home while you continue to live there.

  • The loan, plus interest, doesn’t usually need to be repaid until you pass away or move into long-term care.

  • You can receive the money in a lump sum, smaller amounts over time, or a combination of both.

Home Reversion Plan:

  • You sell part or all of your home to a reversion company in exchange for a lump sum or regular payments, while retaining the right to live there rent-free.

  • The company then receives a proportionate share of the proceeds when your home is eventually sold, typically when you pass away or move into care.

  • This option may result in receiving less than the market rate for the part of your property sold.

It’s important to note that equity release can have long-term financial implications for you and your estate, and it’s typically more expensive than traditional borrowing methods. Therefore, it’s crucial to consider all aspects and seek professional advice before proceeding.

It is possible to leave an inheritance for your family if you use equity release in the UK. Here are some key points to consider:

  • Inheritance Protection Guarantee: Some equity release plans include an option called an ‘inheritance protection guarantee’, which allows you to safeguard a portion of your home’s value for your heirs.

  • Interest Payment Plans: There are equity release plans that allow you to make interest payments to reduce the impact on the inheritance. Some plans even allow ad hoc repayments to manage the loan amount.

  • Drawdown Lifetime Mortgages: This option lets you withdraw funds as needed, rather than taking a lump sum. This can limit the interest accrued and preserve more equity for inheritance.

It’s important to note that using equity release means there may be less inheritance left over after the loan and any interest are repaid. However, careful planning and choosing the right equity release product can help ensure that you can still leave a legacy for your loved ones. Always seek professional advice to understand all the options and implications for your specific situation.

You can move house if you have an equity release plan in the UK. Here are the key points to consider:

  • Portability: Most equity release plans, especially those approved by the Equity Release Council, are portable. This means you can transfer the plan to a new property, subject to the new home meeting the lender’s criteria.

  • Property Value: If you’re moving to a more expensive property, you may be able to transfer the plan without issue. However, if the new property is less valuable, you might need to repay some of the equity release loan.

  • Plan Type: The ability to move and the process involved can depend on whether you have a lifetime mortgage or a home reversion plan. With a lifetime mortgage, you’re more likely to be able to ‘port’ your plan to the new property. With a home reversion plan, since you’ve sold a part of your home, it may affect the amount of equity you can release from the new property.

It’s important to consult with your equity release advisor before making any decisions, as they can provide personalized advice based on your specific circumstances and the details of your equity release plan.

You can pay off your equity release plan early in the UK, but there are several factors to consider:

  • Early Repayment Charges (ERCs): If you repay your equity release loan early, you may be subject to ERCs. These charges compensate the lender for the interest they would have otherwise earned. The amount of the ERC can vary depending on the lender and how long you’ve had the loan.

  • Repayment Options: Some equity release plans allow you to make partial repayments without incurring ERCs, often up to a certain percentage of the loan each year. Others may allow full repayment but with significant ERCs.

  • Financial Advice: Given the potential costs associated with early repayment, it’s wise to seek advice from a specialist equity release advisor. They can help you understand the terms of your specific plan and the implications of early repayment.

Remember, equity release is designed to be a long-term financial solution, so early repayment isn’t typically expected and can come with additional costs.

When you pass away, the equity release plan typically needs to be repaid. Here’s what generally happens:

  • Property Sale: Your home is usually sold by the executor of your estate, and the proceeds are used to repay the equity release loan. Any remaining funds after paying agent and solicitor fees are distributed to the beneficiaries named in your will.

  • Repayment Period: Equity release lenders often allow up to 12 months after your death for the loan to be repaid.

  • Alternative Repayment: If there are sufficient other funds available, your beneficiaries might choose to repay the equity release without selling the property. For instance, they could use savings or other assets, or even take out a mortgage on the property.

It’s important for your beneficiaries or executors to contact the lender promptly after your death to discuss repayment options. Equity release plans can vary, so it’s crucial to check the specific terms of your agreement for any unique clauses or conditions.

Like any financial product, equity release can be mis-sold. Mis-selling occurs when a financial advisor or broker provides inaccurate, incomplete, or misleading information, leading the customer to make an ill-informed decision. This can result in the homeowner suffering financial losses or ending up with a product that doesn’t meet their needs.

If you believe you’ve been mis-sold an equity release product, you have the right to seek compensation. It’s important to act promptly, as there are time limits on how long you have to make a claim. Legal experts specializing in financial mis-selling can often work on a “no win, no fee” basis to help you recover any losses.

For more detailed information on mis-selling and how to claim compensation, you might want to consult with a legal professional or financial advisor who specializes in this area.

To determine if you have been mis-sold an equity release product in the UK, you can look for several common signs:

  • Interest Charges: If the interest charges were not fully explained to you, including how they compound over time, this could be a sign of mis-selling.

  • Early Repayment Costs: If the costs and fees associated with early repayment of the equity release were not properly explained, this might indicate mis-selling.

  • Inheritance Tax Implications: If the advisor did not discuss how equity release could affect your inheritance tax situation, this could be a sign of mis-selling.

  • Alternative Options: If the advisor did not explore or point out alternative options to equity release, this could suggest that you were not given a full range of choices.

  • The Wrong Plan: If you were recommended a plan that was not suitable for your needs or circumstances, this could be considered mis-selling.

If you recognise any of these signs in your experience with equity release, it may be worth investigating further or seeking professional advice to understand your rights and potential remedies. Remember, it’s important to act promptly if you believe you’ve been mis-sold a financial product.

If you think you or a loved one was a victim of mis-sold equity release contact Claimline Legal now for a FREE no obligation case assessment.

0800 779 7457

Claimline Legal operates on a no upfront fee and no-win no-fee basis. Our fees are now set and capped by the Financial Conduct Authority.




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