If the Bank which has released money to me for Equity release goes bust is my house still safe and would I still get the remainder of money owing to me.
All equity release plans offered by Safe Home Income Plans (SHIP) members come with the assurance of guaranteed tenure for life. As such you will be safe in your property as long as you adhere to the terms and conditions of the equity release plan.
In the unlikely event that the equity release provider is no longer able to continue business, the “mortgage book” as it is known (total mortgage assets) would more than likely be sold and the new owner would need to accept the terms of the existing legal mortgage. For example, when Northern Rock ran into difficulties last year its lifetime mortgage book was amongst the first of its assets to be acquired by another organisation. Most lenders will, as a matter of course, look to sell these mortgages on as part of their normal business activities while continuing to service them, this allows funds to be released, often to provide further equity release plans.
As far as the second point is concerned, I believe this is in relation to a drawdown facility where an initial amount is taken and a further reserve is agreed to be available in future if needed. The availability of the reserve funds will depend on the plan taken. Some lenders offer plans with a guaranteed reserve within a fixed period of time, normally 10-15 years. With these plans the new owner of the debt would need to honour the reserve facility as it is part of the terms and conditions. Failure to honour the guaranteed reserve would be a breach of the terms and conditions and therefore you would be free to redeem the mortgage without penalty and look for an alternative with another equity release provider. Those lenders who offer a reserve that has no time limit, will do so subject to certain economic criteria, namely your property value not dropping below the amount you owe the lender (negative equity), the interest rates remaining viable (below 10%) and the lender continuing to offer equity release products.
I hope this helps.
Kind regards,
Mark Blanchfield
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Mark Blanchfield is a fully-qualified equity release specialist advisor for Age Partnership. Tel: 08080 555 222 Web: www.agepartnership.com
Mark mentions the security of Equity release in this time of credit crunch, sounds convincing, but how do you know who is a member of this scheme and not a cowboy.
On another subject a friend sold her house to a building society on a rent back situation. This building society has bee taken over, and now my friend has been told the new BS are selling the house and they have to move out?
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The impossible I can do today, miracles take a little longer!
In response to your first point, you should ensure that any equity release plan that you consider is regulated by the Financial Services Authority (FSA). This will ensure that it is covered by the Financial Services Compensation Scheme and that its features are presented in a manner that is clear, fair and not misleading.
Furthermore, most specialist equity release advisors will only recommend plans that abide by the guidelines set out by the industry trade body, Safe Home Income Plans (SHIP). In particular, this includes a ‘no negative equity guarantee’, ensuring that you can never owe more than your home is worth in the future and a debt is never left to beneficiaries. You also benefit from security of tenure for life.
On the contrary, the second scenario that you describe sounds more like a ‘sale and rent back’ scheme. This is where you sell your property for a reduced amount and then enter into a tenancy agreement to rent the property back from the new owners. You should be aware that these schemes are not regulated and you have no guarantee of long-term tenure in the property. What is more, some consider these plans to offer poor value for money. I would recommend that you consider all other options before looking into this kind of scheme, which should not be confused with regulated equity release – my area of expertise.
I hope that this helps.
Kind regards
Janice Walsh
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Janice Walsh is a fully-qualified equity release specialist advisor for Age Partnership. Tel: 08080 555 222 Web: www.agepartnership.com
Hi Jimbo,
All equity release plans offered by Safe Home Income Plans (SHIP) members come with the assurance of guaranteed tenure for life. As such you will be safe in your property as long as you adhere to the terms and conditions of the equity release plan.
In the unlikely event that the equity release provider is no longer able to continue business, the “mortgage book” as it is known (total mortgage assets) would more than likely be sold and the new owner would need to accept the terms of the existing legal mortgage. For example, when Northern Rock ran into difficulties last year its lifetime mortgage book was amongst the first of its assets to be acquired by another organisation. Most lenders will, as a matter of course, look to sell these mortgages on as part of their normal business activities while continuing to service them, this allows funds to be released, often to provide further equity release plans.
As far as the second point is concerned, I believe this is in relation to a drawdown facility where an initial amount is taken and a further reserve is agreed to be available in future if needed. The availability of the reserve funds will depend on the plan taken. Some lenders offer plans with a guaranteed reserve within a fixed period of time, normally 10-15 years. With these plans the new owner of the debt would need to honour the reserve facility as it is part of the terms and conditions. Failure to honour the guaranteed reserve would be a breach of the terms and conditions and therefore you would be free to redeem the mortgage without penalty and look for an alternative with another equity release provider. Those lenders who offer a reserve that has no time limit, will do so subject to certain economic criteria, namely your property value not dropping below the amount you owe the lender (negative equity), the interest rates remaining viable (below 10%) and the lender continuing to offer equity release products.
I hope this helps.
Kind regards,
Mark Blanchfield
Mark Blanchfield is a fully-qualified equity release specialist advisor for Age Partnership. Tel: 08080 555 222 Web: www.agepartnership.com
Thanks Mark. I find this reassuring.
Mark mentions the security of Equity release in this time of credit crunch, sounds convincing, but how do you know who is a member of this scheme and not a cowboy.
On another subject a friend sold her house to a building society on a rent back situation. This building society has bee taken over, and now my friend has been told the new BS are selling the house and they have to move out?
The impossible I can do today, miracles take a little longer!
Dear Stattovic,
In response to your first point, you should ensure that any equity release plan that you consider is regulated by the Financial Services Authority (FSA). This will ensure that it is covered by the Financial Services Compensation Scheme and that its features are presented in a manner that is clear, fair and not misleading.
Furthermore, most specialist equity release advisors will only recommend plans that abide by the guidelines set out by the industry trade body, Safe Home Income Plans (SHIP). In particular, this includes a ‘no negative equity guarantee’, ensuring that you can never owe more than your home is worth in the future and a debt is never left to beneficiaries. You also benefit from security of tenure for life.
On the contrary, the second scenario that you describe sounds more like a ‘sale and rent back’ scheme. This is where you sell your property for a reduced amount and then enter into a tenancy agreement to rent the property back from the new owners. You should be aware that these schemes are not regulated and you have no guarantee of long-term tenure in the property. What is more, some consider these plans to offer poor value for money. I would recommend that you consider all other options before looking into this kind of scheme, which should not be confused with regulated equity release – my area of expertise.
I hope that this helps.
Kind regards
Janice Walsh
Janice Walsh is a fully-qualified equity release specialist advisor for Age Partnership. Tel: 08080 555 222 Web: www.agepartnership.com