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Safety Check

 

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Is your loan provider a member of SAHERPA?
Before you take out a Home Equity Release loan, we would strongly suggest that you confirm whether or not the selected loan provider is a member of SAHERPA. Usually our members display their status as accredited members of SAHERPA.

This is the "seal of approval" that SAHERPA assigns to accredited supplier members if they meet our standards. Does the loan provider that you are considering display this accreditation? Please click here to view a list of SAHERPA accredited home equity release providers.  

If your loan provider is not a member of SAHERPA, you should ask them why. There is every possibility that they are unable to comply with our rigorous standards and requirements for membership, with the consequence that consumers are potentially exposed in the event of them contracting with a non-SAHERPA accredited loan provider.
 
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Have you received advice from an appropriate, qualified and independent source?

If you wanted to buy a new car, and you went and spoke to a sales person at a particular car dealership, he would undoubtedly try to sell you one of the models that his particular dealership stocks. In this situation, wouldn't it be a better idea for the prospective buyer to rather get input, independent of the sales person, regarding his particular brand of car, or for that matter input from someone that might be able to tell him whether or not it might be more appropriate for him to buy either a bicycle or a motorbike as opposed to a car.

 

Home Equity Release loans are no different. Representatives of Home Equity Release loan providers will undoubtedly tell consumers about the virtues of their own products. The problem is that they are potentially conflicted in providing this advice, as consumers might be able to get a better deal by approaching an alternative Home Equity Release provider, or for that matter, considering a totally different approach that might not include the use of Home Equity Release products. Furthermore, in the event of customers making use of Home Equity Release products, the implications of using these products can be onerous in terms of inheritance, estate duty and other financial planning issues.

 

As a consequence of the above, before taking out a Home Equity Release loan, you should ensure that you receive appropriate advice from an suitably qualified financial adviser that is independent of the loan provider.

 

As a minimum, in order to be accredited by SAHERPA, loan providers need to commit to ensuring that advice is provided to their prospective customers by independent financial advisers that are at least "fit and proper" in terms of FAIS. We believe that such an approach will help customers fully understand not only the risks and implications of the transaction that they are considering, but also the other alternatives that are available to them.

 

Consumers should be concerned in the event of a Home Equity Release loan provider not requiring the customer to consult with an independent third party in order to assess the appropriateness of the offering.

 
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Are you exposed to negative equity risks?

If a borrower lives longer than expected, or if property prices depreciate significantly, or in the event of a significant ongoing increase of the interest rates, the ultimate value of the outstanding loan could way exceed the underlying value of the property extended as security for the Home Equity Release loan. 

 

It is specifically because of this issue that we insist that our accredited loan providers offer a non-negative equity guarantee that limits your maximum possible liability to the net sale proceeds of your home.

 

If your loan contract does not explicitly confirm the existence of a no-negative equity guarantee, you are potentially exposed. If loan providers or any of their sales staff tell you that this is not important, that all you need to do is look to recent property appreciation as a guide to what future property appreciation scenarios might be, you should be very concerned.

 

You need to ensure that this guarantee is committed to writing, and contained in your loan agreement. SAHERPA members will always do so.

 
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Do you have security of tenure in your own property?

One of the important principles of the Home Equity Release loan is that, by virtue of the borrower continuing to own the property, he / she would be allowed to continue to reside in the property for as long as the loan continues to run. Remember, Home Equity Release loans are ordinarily repayable on the death of the borrower. As a consequence, it is vitally important that borrowers have a committment from their loan providers, that they will be able to live in their properties for the rest of their lives. SAHERPA members will give you this undertaking.