Equity Release Jargon Buster

To explain the terminology involved in equity release, we hope you will find our jargon buster useful. Don’t forget, we’re just a quick free call away on 0800 411 8668, if you need further clarification of anything.

The A to Z Guide to Equity Release.

Adviser

An equity release adviser is a professionally qualified individual who is authorised to provide financial advice to you on equity release plans.

Annuities

A regular payment which is made to individuals in exchange for a sum of money (normally associated with pension plans).

Compound Interest

Instead of regular mortgage interest payments, interest is added to the original loan amount together with any previous interest which has been added.

Consultation

A free meeting with an equity release adviser which enables you to assess whether equity release is right for you.

Drawdown Lifetime Mortgage

A Lifetime Mortgage which is set up on a standby or flexible basis enabling you to release money as it is needed.

Early Repayment Charges

Because most Lifetime Mortgages have a fixed interest rate for life, a penalty or Early Repayment Charge may be made if the Mortgage is redeemed before your death or move into permanent long term care.

Equity

The value in your home after deducting any outstanding mortgages and secured loan balances.

Equity Release

A method of releasing capital from the value of your home.

Estate

The value of your assets less liabilities at the date of your death.

Fixed Rate

The rate of interest chargeable on a Lifetime Mortgage which is normally fixed for life.

FSA

The Financial Services Authority which is the Government Body that regulates equity release plans and equity release advisers.

Home Reversion plan

An equity release plan in which you sell a share in your home to a specialist company in exchange for a lump sum or a series of stage payments. No rent or interest is payable.

Independent Financial Advice

An independent equity release adviser can select plans from the whole of the market assuring that the most suitable plan is recommended for you.

Inheritance tax

A tax which is charged on the value of your estate upon your death above the prevailing threshold (£325,000 2011/12).

Initial Disclosure Document

A document given to you by our financial adviser setting out the Key facts about our Services.

Lasting Power of Attorney

A document which allows you to authorise someone you trust to manage your affairs and make financial decisions on your behalf.

Lifetime Lease

A lease which is granted providing security of tenure to you for life when you enter into a Home Reversion plan.

Lifetime Mortgage

A mortgage on which interest is normally accrued or compounded rather than paid. The mortgage is not repayable until your death or move into permanent long term care.

No Negative Equity Guarantee

An assurance that you will not lose your home and that your heirs will not suffer any additional costs if the amount of the mortgage with compound interest should exceed the value of your home.

Personalised Illustration

A quotation for an equity release plan set out in a format which has been approved by the Financial Services Authority.

SHIP

Safe Home Income Plans (“SHIP”) is the organisation set up to safeguard the interests of consumers entering into equity release plans.

State Benefits

The range of means tested and non means tested allowances to which you might be entitled.

Survey/valuation

An inspection of your home by a surveyor on behalf of the recommended equity release plan provider.

Top Ups

Supplementary releases of equity from your home, normally associated with Home Reversion plans.

Whole of market

The phrase “Whole of Market” means that Bower Retirement Services offers equity release plans from all of the equity release companies in the UK, i.e. the “Whole of the Market”.

Care Fees Annuity

Also referred to as Care Fees Payment Plans, Immediate Needs Annuity, or Immediate Care Plans. These involve placing a single lump sum with an insurance company who then pay an agreed tax-free amount at regular intervals, directly to the care provider for the rest of that person’s life. Benefits can increase over the years to help keep pace with care fee increases.

Immediate Needs Annuity

Also referred to as Care Fees Payment Plans, Care Fees Annuities, or Immediate Care Plans. These involve placing a single lump sum with an insurance company who then pay an agreed tax-free amount at regular intervals, directly to the care provider for the rest of that person’s life. Benefits can increase over the years to help keep pace with care fee increases.