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Equity Release Jargon Buster

Equity release is a big decision. When researching equity release or lifetime mortgages you might come across confusing terms and phrases.

Making things clearer

Our A-Z guide explains some of the most commonly used ‘jargon terms’ and phrases you’ll hear about equity release.

Arrangement fee

An agreed fee you pay to your provider to cover administration costs involved in releasing the equity from your home.

Advice Fee

A fee charged by your Financial Adviser for providing you with advice on the most suitable equity release product, having assessed your personal situation, circumstances and needs.

Beneficiary

A legal person or people you nominate that would receive the proceeds of your estate when you die.

Compound Interest

Interest accrued on a lifetime mortgage that is added to the loan amount and then future interest is charged on top. In other words, interest charged on interest.

Initial Consultation

This is a free meeting with an equity release adviser.

Downsize

To downsize means selling your home and buying a smaller property, typically of lesser value.

Early repayment charge

A fee charged by a provider if you pay off a lifetime mortgage early or within a certain period of time.

Equity

This is the market value of your home, less any outstanding mortgages and loans secured against the property. If you own your home outright, then you own 100% of the equity.

Equity Release

This is a way to access the money tied up in your home whilst continuing to live in it, either by borrowing against it or selling all or part of it.

Equity Release Council (ERC)

The Equity Release Council is the industry body that represents providers, qualified advisers, lawyers, intermediaries and surveyors who work in the equity release sector. Members must adhere to the Equity Release Council's Statement of Principles which puts in place a number of safeguards for consumers.

OneFamily Advice are members of the Equity Release Council.

Estate

Everything you own when you die less any money you owe. This can include property, savings, investments and possessions. Equity release will reduce the value of your estate.

Financial Conduct Authority (FCA)

The independent body responsible for regulating the conduct of financial services firms, including equity release companies and advisers in the UK.

Inheritance Protection Guarantee

A feature available with some lifetime mortgages that allows you to protect a portion of your property's value as a guaranteed inheritance for your loved ones. Having an Inheritance Protection Guarantee will reduce the amount of money that you can release from your property and may result in a higher interest rate being charged.

Joint account holder

Equity release plans run until the money is repaid, or until the last borrower dies or moves into permanent long-term care. Having a joint equity release plan means that your spouse or partner would not need to move home if they outlive you, or you move into permanent care. They will be also subject to any loan agreement secured against their property.

Lasting Power of Attorney (LPA)

A Lasting Power of Attorney (LPA) is a legal document that lets you nominate one or more people (your attorneys) you trust to make decisions on your behalf, should you become incapable of doing so in the future.

Lifetime mortgage

A lifetime mortgage is the most common type of equity release; a loan secured against your home, which is repaid with interest, when you die or go into long-term care. The percentage you can release will depend on your age. You maintain ownership of the property and continue to live there.

Loan to value (LTV)

This is the loan amount released as a percentage of the property's overall value. The amount released will depend on the age of the youngest applicant and the chosen lenders criteria. As interest is added to a lifetime mortgage the percentage you owe may increase over time (depending on your plan), especially if property values only increase slowly.

No-negative equity guarantee

This feature of most lifetime mortgages ensures that you will never owe more than the value of your property (as long as you abide by the terms of the agreement) - even in the event of a fall in future house prices. This guarantee is enforced by the Equity Release Council.

Valuation / Survey

The formal assessment of a property’s value based on its condition and the current housing market, carried out by a surveyor on behalf of the equity release plan provider.

Whole-of-market

OneFamily Advice recommend lifetime mortgage plans from all lifetime mortgage providers, or ‘whole-of-market’.

Whole-of-Market Equity Release Advice

A whole-of-market equity release adviser can select plans from the entire market and is not tied to one company. This means they can recommend the best and most suitable plan for you.

Getting advice

Equity release is a big decision and financial commitment related to your home. There’s a lot to consider, that’s the reason lifetime mortgages are only available through an adviser.

OneFamily Advice are an expert team of impartial, whole-of-market and qualified advisers who’ll help you to decide if it’s the right option for you. We're a member of the Equity Release Council and only advise on products with a ‘no negative equity guarantee’. Our friendly team can answer all your questions, guide you through the lifetime mortgage process and help you make the right decision for your circumstances.

Make an informed decision

We want to make sure that you understand all the language about equity release so you can make an informed decision.

It’s worth bearing in mind, a lifetime mortgage will reduce the value of your estate and it may affect your entitlement to means tested state benefits.

OneFamily Advice

Call us for your free initial consultation on 0800 144 8244* or request a call back.

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Important: The loan amounts above are an illustration of the amount you could borrow. The actual amount may vary depending on your individual circumstances. The figures are not guaranteed and do not constitute an offer to lend. The loan amount will need to pay off any existing mortgage secured against the same property.

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