Frequently Asked Questions about Equity Release Plans

Is it possible to end up in a negative equity situation with an Equity Release Plan?

With property prices increasing and decreasing over the course of time, it is easy to think that borrowing money which accrues interest could possibly result in a negative equity scenario. However, if the equity release plan is with a company who belongs to the organisation S.H.I.P. this is not the case. This organisation has a code of conduct which must be adhered to by all of its members, part of the code states a NO negative equity guarantee must be applied to all plans. However, it is important to realise that depending on the performance of the housing market at the time of the sale, you could be left with no or little value in your home. All of these eventualities should be discussed in further detail with a Independent Financial Adviser.

Does Equity Release affect state benefits?

It is possible that state benefits will be reduced or even stopped if an Equity Release Plan is actioned. For those people who receive Council Tax Benefit, Pension Credit or any other means tested social security benefit, it is advisable to seek further advice from and Independent Financial Adviser.

What happens to the property if one of the policy holders dies?

As long as the policy is in joint names the Equity Release Loan does not have to be repaid until both parties have passed away or moved into full time residential care. Either policy holder has the right to remain in the property for life.

How much equity can be released from the property?

The amount which can be released is dependant on certain factors: The type of plan you choose; for example, with home reversion plans it is possible to release the full value. The age of the applicants also has an affect on the amount of cash which is released. Online calculators can be used to give an approximate idea of the amount.

Are Equity Release Plans regulated?

All UK Equity Release Plans are now fully regulated by the Financial Services Authority (FSA). Many Equity Release companies are also members of Safe Home Income Plans (S.H.I.P). This organisation was set up in 1991 to protect homeowners when purchasing an Equity Release Plan. All companies who are members of S.H.I.P adhere to a code of conduct,provide a "No negative equity guarantee" as well as simple, easy to understand presentation of plans.

Download the Equity Release PDF Guide here - see our other free PDF guides here

Guide Contents

What is Equity Release?
The Different Types of Equity Release Plans
The Different Types of Lifetime Mortgages
Shopping Around for the best Equity Release Plan
Applying for an Equity Release Plan
Frequently Asked Questions About Equity Release Plans
Where to get more help and information about Equity Release

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