Safe Home Income Plans (SHIP) are one way of protecting equity release customers. The SHIP code of conduct means that any organisation working with SHIP in offering equity release schemes must abide by a series of rules which ultimately protect equity release customers. Therefore for any individual or couple who are considering committing to an equity release scheme, it is important they deal with scheme providers who abide by these rules.
Retiring with a Stronger Income
Equity release allows people to access some of the equity within their home without having to sell their property. This is ideal for retired people who wish to have access to some of their equity and yet retain their own property.
Not all equity products work the same way. Lifetime mortgages are schemes where you maintain ownership of your property. In return you agree to repay the entire principle balance and accruing interest at death or when you move to a home care facility. Under this type of financial product, you have enhanced, drawdown, interest-only, and lump sum or roll up products. Researching these four lifetime mortgages can help you decide on the product you want to take on. Interest accrual and repayment options can vary slightly between a couple of these products, thus allowing all consumers to find something that fits their needs.
Home reversion does not create an issue with interest or repayment, but it does ensure you lose full ownership of your home. You retain ownership on portions you do not sell. You gain funds to use and have fewer headaches for repaying a loan later, so for some it is an attractive option.
A Few SHIP Rules
• A key part of the SHIP rules state that home owners must have a lifetime residence guarantee for their property. This gives the customer the peace of mind that they will always have a roof over their heads.
• The criteria laid down by SHIP also stipulate that providers must be completely open, clear and honest about their contracts. The contract must allow the home owner to change property to another suitable property without any financial penalty being imposed.
• Perhaps the most important part of the SHIP Code of Conduct in the current depressing housing market is that customers are protected by a ‘no negative equity’ guarantee which means that even if the property price slumps, a customer can never owe more than the value of the home.
Declining Equity Worries
Property values fluctuate. In a housing boom they can increase to the point of amazing equity. It is also a great time to sell because there is more value to gain from the home. Of course, with upwards movement in value, there are also times when property declines or depreciates.
The UK has suffered two recessions started by an explosion in the housing boom of the early noughties. Housing prices have yet to regain from the significant drop experienced in many areas. London is on the rise again and slowly returning to pre- depreciation amounts. The point is SHIP, now the Equity Release Council has ensured protection is in place for you.
When choosing a lifetime loan check for the clause and if you do not see the no negative equity clause ask for the paperwork to be redrawn, walk away, or have the agent point it out to you.
Selecting Agent Help
If you are unsure the equity provider you have contacted is a part of SHIP, request to see their certifications, check the approved list on the .gov page for the council, and have an independent party help you.
Financial experts in lifetime mortgages and equity products exist to help you. These experts can be found through the Internet, networking, or banks. They must also follow regulations to adhere to FSA regulations by passing an examination for financial experts. With a second person looking over the loan or home reversion documents, you can feel at ease regarding your rights. You can also feel the SHIP Code of Conduct is in place and followed.
You are never under any obligation to sign paperwork until you feel comfortable about the financial product you are taking on. It is possible to walk away from hired help, the retirement equity company, and other parties involved.
If you are considering an equity release scheme it is advisable to select one which adheres to the SHIP Code of Conduct. The Internet is a great help to locating these individuals. As long as you follow due diligence researching companies thoroughly including complaint sites it is possible to feel comfortable and secure a proper loan.