Equity release products have become increasingly popular in the recent years especially for the retired. Two of the most common mortgages that are being applied for are the lifetime mortgages and the home reversion schemes. The fact is that most home owners in retirement realizes that they have a lot of money tied up in their properties; therefore, in order to have a much more comfortable retirement years, they decided to release some of that tied up money through equity release schemes.
The uk interest only mortgage is an example of a lifetime mortgage in which a person borrows and only pays back the borrowed amount at death. The home reversion scheme is where a person sells a certain amount of his property to the mortgage provider for either a lump sum amount or monthly payments. So by now you might be wondering how these people are protected and are there regulations for these matters.
The answer is yes. The Financial Services Authority is the governing body that regulates all lifetime mortgages as well as home reversion schemes. This body makes sure that consumers who are looking for a way to provide sustainable income in retirement are protected.
The fact is that the elderly and potentially vulnerable people are most likely to be the consumers of home reversion schemes and lifetime mortgages and they need to know that they are protected. This is why regulations in this area is necessary so that the consumers can be confident in their decision and in the sector.
The Financial Services Authority has imposed rules and regulations to prevent unscrupulous practices by loan sharks whose aim is to entice consumers to run up debts and then charge them exorbitant interest rates. These lenders will be fined if found guilty of these practices. The Financial Services Authority has imposed stricter guidelines that need to be followed by all lenders as well as borrowers. For example, lenders will need to have proof of an Individual Savings Account, a personal equity plan or evidence of a persona pension plan before approving an interest-only mortgage. If they do not, they will be penalized by the Financial Services Authority.