I talked about UK mortgage lender Northern Rock and the sale of their equity release mortgage portfolio (see Northern Rock Relieved of Equity Release Portfolio).
As part of the research I found out about a company called Safe Home Income Plans. Safe Home Income Plans were formed in 1991 with the aim of ensuring some form of protection for equity release plan holders.
They state their aims as follows (I imagine hand on heart whilst pledging)
- to ensure the protection of home equity release plan holders
- the promotion of safe home income and equity release plans
Companies that participate in this scheme must display the SHIP logo on their printed materials and must pledge to adhere to the SHIP Code of Practice. Guess what? Northern Rock is one of their members. The other 18 members for those who really want to know are
- no I really can’t bothered to type them all out go look here for the list http://www.ship-ltd.org/members/index.shtml
What is an Equity Release Mortgage?
It’s a mortgage that is offered to people over 55 who want to release the equity they may have tied up in their homes. There are basically two types of equity release schemes available in the UK. One is a called Lifetime mortgage the other is a Reversion. A Reversion plan is where you sell a percentage (up to 100%) of your home to the company giving you the load and get to live in the house till you die. Unlike a mortgaged plan, there is no interest to pay on this type of equity release plan. The loan is repaid once the house is sold. How much you get will depend on a surveyors valuation, it is unlikely to be the market value of the property, and it depends on factors such as your age, health and property value. As with all loans secured on property, the surveyor is working for the lender not for you.
SHIP’s website is compact and concise and has some good tips for anyone considering taking out a home equity release mortgage. Understanding a bit more about equity release plans will only benefit you. Their press release database contains some interesting surveys on the state of the market.
There is a members directory which you won’t be surprised to know contains many of the big name UK mortgage lenders. According to their latest press release (Dec 2007) 90% of the UK equity release market is represented by their members.
SHIP Code of Practice
- The members of SHIP agree to provide fair, simple and complete presentation of their plans. The benefits, obligations, variables and limitations must be clearly set out in their literature, including all costs which the applicant has to bear in setting up the scheme, the position on moving, the tax situation and the effect of changes in house values.
- The client’s legal work will always be performed by the solicitor of his or her choice. In all cases, prior to the completion of the plan the solicitor will be provided with full details of the benefits the client will receive. The solicitor will be required to sign a certificate to the effect that the scheme has been explained to the client.
- The SHIP certificate will clearly state the main cost to the householder’s assets and estate e.g. how the loan amount will change or whether part or all of the property is being sold.
- All SHIP plans carry a “no negative equity” guarantee i.e. you will never owe more than the value of your home.
IMPORTANT NOTICE: I am not nor have I ever been an independent financial advisor. Neither am I registered under the Financial Services Authority. I am therefore not authorised under the Financial Services and Markets Act 2000 to offer investment advice.
The purpose of these articles are to inform, not to advise. Seek professional, impartial, independent financial advice from someone who is qualified and authorized before making the financial decision to take out an Equity Release Mortgage.
Photo Courtesy of Ali Farid ©