Blog > How do you spot equity release companies to avoid?

How do you spot equity release companies to avoid?

Worried mature couple

By Richard Groom • 28 February 2023 • 6 min read

Help to choose the right equity release company

When you start doing some research into equity release you soon realise it’s a popular product with plenty of providers, so how do you decide which one to go with? We’ve put this information together to help you spot the equity release companies to avoid – and choose the right provider and product for you.

Here is what we will be covering in today’s blog:

  • What is an equity release company?
  • Is the company FCA-authorised and a member of the Equity Release Council?
  • Does the company offer the product features you need?
  • How safe is equity release?
  • Could I be mis-sold equity release?
  • Where to find equity release reviews
  • How to avoid an equity release nightmare

What is an equity release company?

In this blog, we will look at equity release providers. They are the companies that actually provide you with a lifetime mortgage or a home reversion plan. Also, since most providers require you to go through an equity release adviser/broker, we will mention what to look for when choosing one of those, too.

Now let’s look at some essential questions to ask when choosing an equity release company…

Is the company FCA-authorised and a member of the Equity Release Council?

The first two things to check when assessing an equity release company is that it is:

  1. Authorised by the Financial Conduct Authority (FCA) to provide equity release products. This is the UK’s financial services regulator and watchdog.
  2. A member of the Equity Release Council (ERC). This is the UK’s governing body for the industry and their members must abide by a strict code of conduct.

In reality, it is very unlikely that you will encounter a UK equity release provider that doesn’t meet both of these criteria. Even so, you may wish to check any firm’s credentials before proceeding with them on the FCA’s Financial Services Register and the ERC’s list of provider members

There is a particular reason why you should avoid equity release providers who aren’t members of the Equity Release Council (ERC). Launched in 1991, the ERC exists to safeguard the interests of equity release customers and to promote safe equity release products. This has protected customers for over 30 years, helping to reassure anyone who might be wondering “how safe is equity release?”.

Members of the ERC have agreed that their equity release products will meet standards that protect you as a consumer. These important ERC standards include: 

  1. The no negative equity guarantee. This gives you peace of mind that you will never owe more than the value of your home. All lifetime mortgage plans approved by the ERC come with the guarantee that once your home is sold and the estate agent and solicitor fees have been paid, neither you nor your estate will be liable to pay any more. That’s true even if the amount left is not enough to repay the outstanding loan.
  2. The right to move home without penalty. You have the right to move your equity release plan to a new home, as long as the new property meets the lender’s criteria. This will be important if you ever wish to downsize to a smaller property in the future, or move closer to family or friends.
  3. The right to stay in your home. Whether you select a lifetime mortgage or a home reversion plan, you’ll want the guarantee that you’ll have the right to live in your home for the rest of your life, or until you move into long-term care. This is another standard that ERC members who provide equity release plans have agreed to.

All members of the ERC abide by these standards. However, it is worth looking into the details of any plans you are offered. For example, some lenders have a more flexible attitude to those wanting to move house after arranging equity release. If this is something you feel may be possible and you’d like more information, please call us on call 0808 178 3055 or request a free call back and we will arrange an appointment with one of our selected equity release advisers for help. 

Does the company offer the product features you need?

Although ERC members agree to standards such as the ones above, there are significant differences between them in terms of the plans and product features they offer. 

For example, some lenders specialise in plans that offer higher cash releases for those with poor health, whilst others do not. Some let you pay off the interest that accrues each month so your loan never increases, while others won’t have this feature.

You may wish to take a look at our comprehensive guides to equity release plans and make a note of any product types and features you would like. Getting a clearer idea of what you are looking for when choosing an equity release company will help your adviser match you with a suitable provider and product.

What are the company’s fees?

Each equity release provider has its own fee structure, so please check on this before deciding who to go ahead with. 

First, take a look at the initial set-up fees. These will typically include valuation, arrangement and completion fees. You can compare the fees of each provider with a plan that you are considering.

Next, look at costs you may incur after you have taken out your equity release plan. In many cases, there won’t be any, but there are exceptions. For example, lenders typically charge an early repayment fee if some or all of your lifetime mortgage is paid off before you pass away or move into long-term care. So if you feel that paying off a lifetime mortgage early may be an option you’d take up, compare different providers’ fees before you commit to your plan.

What’s the difference between the main equity release companies?

As we’ve mentioned above, each equity release provider differs in terms of the types of plan it offers, its product features and its costs. To help you get to grips with the main differences, we’ve written comprehensive guides to some of the leading names in equity release:

Remember too that our selected equity release advisers can recommend the best plan and provider for you. They have access to detailed information about hundreds of equity release plans on the market, so they can save you hours of time trawling for the information online. You can call 0808 178 3055 today or request a free call back to book an appointment with an adviser, or to talk to one now.

Where can I find equity release reviews?

As well as our guides to each provider’s product types, features and costs, you may also want to take a look at reviews of any providers recommended to you. To find the most accurate, up-to-date and trustworthy equity release reviews, we recommend visiting Trustpilot

Here are just some of the leading lenders’ Trustpilot pages together with their star rating, to help you get started on those equity release reviews:

Please remember however that you may not be able to liaise with your chosen equity release provider as some do not deal directly with the public. You will in most cases need to get information and advice from a specialist equity release adviser, such as the ones you can access via Equity Release Wise. They will then work on your behalf to arrange everything.

How safe is equity release?

As we mentioned above, equity release is regulated in the UK to protect you. The important protections offered by the Equity Release Council (ERC) are there to reassure you about taking out an equity release plan. In addition, apart from a few exceptional circumstances, anyone taking out a plan must take advice from an adviser registered with the Financial Conduct Authority (FCA). 

When you come through Equity Release Wise to access your quotations and explore your options, you can rest assured that our selected advisers are all authorised by the FCA. Furthermore, they will only recommend you plans and providers from members of the ERC, so you won’t cross paths with any equity release companies to avoid.

For further peace of mind, our selected advisers encourage you to involve your family in the fact-finding and decision making process. By inviting them to be present for any appointments or telephone conversations, your loved ones can ask any questions of their own and have a better understanding of what is involved. 

Equity release is not going to be right for everyone, so when you speak to an equity release adviser, they will honestly explain all the pros and cons of equity release to you. In addition, they will check you have considered the alternatives to equity release – such as downsizing – and will discuss your reasons for wanting the cash boost. 

In addition to considering which equity release companies to avoid, you should also avoid anyone who suggests you arrange equity release to invest your money. No reputable adviser would recommend this due to the way in which interest accrues on a typical equity release plan. 

How to avoid an equity release nightmare

When you are ready to talk to someone, the best way to avoid your own equity release nightmare is to speak to a qualified, FCA-authorised adviser who is also a member of the Equity Release Council. An adviser like this will for example tell you if equity release is the best option for you right now, or whether another option would be more suitable.

All of Equity Release Wise’s selected advisers are FCA-authorised and are members of the ERC. Not only that, but all your initial advice, information and quotes are all free and without obligation. Only if you choose to proceed and your case completes will you pay an advice fee to your adviser, which will be fully explained to you beforehand.

You’ll never be under any pressure to take out a plan by speaking to our selected advisers. So why not speak to a friendly member of the Equity Release Wise team today? Call us on 0808 178 3055 or request a call back at a time that suits you.

We hope you feel more confident now in identifying which equity release companies to avoid. If you still have any questions regarding how safe is equity release, or if you’d like to find out how much you could unlock from your home, make sure you speak to Equity Release Wise.

How can we help?

To find out more about equity release or arrange a consultation with an adviser, please call or request a call back and we’ll be happy to help further.

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