Warning Over New equity Release Loan Plan
There has been a growing popularity for equity release loans amongst retired people in the UK in recent years, as many people use the value of their home in order to supplement their income, or pay off loans and other debts, in retirement.
The majority of these schemes are regulated by the Financial Services Authority (FSA), as well as complying to the standards set out by the trade body SHIP (Safe Home Income Plans), to offer additional protection to individuals taking out this type of loan.
But the FSA have now issued a warning to anyone looking to take out an equity release loan, or similar type of product, as a new scheme, which is advertised as a “no cost” equity release option, has just been launched on the market.
The Crossroads scheme from Asset Income Plan Ltd has been highlighted by the FSA, along with other similar plans, for not being clear about the associated risks of the plan for those individuals who take out such a scheme.
The scheme offers a no cost way of paying a home owner an annual income of 5 per cent of 50 per cent of the value of their property for a set period of time. However, the FSA says that the marketing literature does not make clear that a legal charge is taken out over the property, thereby placing the person’s home at risk of repossession.
The FSA has warned that this is not a conventional equity release loan scheme and it is not covered under FSA rules, or by the Financial Services Compensation Scheme, which means that a borrower would have no right to complain to the Financial Ombudsman Service (FOS) in the event of things going wrong.
Anyone looking for an equity release loan should seek professional advice from a suitably qualified Independent Financial Adviser before they take out any type of loan of this nature.
