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Equity Release - Getting The Right Advice

The consumers Organisation Which? recently investigated 22 financial advisors to examine the quality of their advice to home owners considering equity release. They found that the advice given to pensioners was inadequate in 20 per cent of the cases and was excellent in only two.

Equity release is a way of unlocking the value in a home to provide income and / or capital in retirement. Equity release is not for everyone and it should be very carefully considered.

The first step is usually advice to a home owner from a financial advisor specially qualified to advise on equity release. The advice given should be wide ranging, looking at costs, interest rates, alternatives and the practical detail of the scheme. Advice on what scheme to choose, if any, should only be offered by a financial advisor after a detailed "fact find" to identify the client's needs.

A recent Which? investigation found that 12 advisors advised comprehensively but that nine advisors failed to discuss basic product features, three neglected to discuss interest rates and how the scheme cost would increase over time and six neglected to advise that house prices could decrease as well as rise. Four of the visits carried out by Which? were near perfect, only missing one or two key points.

Head of Residential Property, Solicitor and Director, Jill Cochrane says "A key issue that we take care to ensure clients have fully considered but which, as this survey shows is sometimes neglected by financial advisors is the potential of an alternative to equity release. Downsizing, conventional mortgage, borrowing money from family, taking in a lodger and the possibility of local authority grants, all are potential sources of funds that should be thought about before a decision to take out an equity release loan is made".

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Created: 27 January 2012