Concern has been raised about overseas mortgage rules from Europe that could see the revival of equity release-style products, which are generally aimed at older people.
The new-style equity release lite is similar to standard equity release, except for the fact that it has a necessity to pay interest; while this removes the equity release rules, it means payments could be defaulted and borrowers’ homes repossessed.
The changes have been set out by the European Mortgage Directive (EMD), based on what is currently known as an equity release mortgage, whereby pensioners can, in effect, withdraw equity from their property in the form of a long-term loan.
Generally provided as a lump sum or regular monthly income, depending on preference, the interest can be paid monthly or rolled up and repaid as part of the closure of the estate upon death. It is feared that people will presume these equity release lite products are similar to the previous equity release, when in fact they do not require advice to be provided by the lender.
The directive basically allows lenders to request a nominal payment of at least £1 each year, which removes it from the standard equity rules.
A large majority of people will seek the advice of a qualified professional when looking into borrowing money, particularly when deciding whether or not to raise it against their existing property. As a mortgage advisor who has done their CeMAP training, you will be able to identify your customers’ needs and provide them with best advice to ensure they fully understand any borrowing they are applying for.
