A | B | C| D | E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S | T | U | V | W | X | Y | Z
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| Amount Released |
The amount of money paid to the customer by an equity release provider for all or part of their property
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Annuity
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an annuity converts a lump sum into regular income, which is taxed
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APR
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annual percentage rate
– the APR includes important factors such as:
- the interest rate you must pay;
- how you repay the loan (length of loan agreement [or term], frequency and timing of instalment payments and amounts of each payment );
- certain fees associated with the loan; and
- certain compulsory insurance premiums (for example, payment protection insurance)
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Arrangement fee
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a commitment or administration fee usually payable to the lender to reserve the mortgage funds
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| Authorised and regulated |
Authorised and regulated firms have taken specific steps to be authorised by the FSA and are bound by the relevant rules and regulations (see FSA below)
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| Bankrupt |
When an individual has reached the point of being totally incapable of repaying their outstanding debts
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| Base rate |
The base rate is the rate the Bank of England use to lend to other financial institutions. It represents the minimum amount of interest that should be charged on any loans. Individual lenders then set their own Standard Variable Rate, taking the base rate into account
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| Beneficial owner |
The person entitled to the benefit of property. Normally this is the legal owner but can be different, e.g. where an investment is held by a nominee
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| Capital |
Money or valuable assets which, if invested, can grow in value or generate an income
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| CCJ |
A County Court Judgement recorded against a person e.g. for non-payment of debt
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Compound interest
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the interest owed on a lifetime mortgage – it is based on the original loan and on the accumulated past interest
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| Commission |
This is the fee payable to an intermediary to cover the cost of executing and settling a transaction. This can also be the payment received by an intermediary on the sale of investments or insurance products
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| Debt/existing debt |
Money owed to one party by another |
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| Debtor |
A person or an entity (such as a bank or company) that owes a debt to some other person(s)
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| Discretionary income - annual |
The income you have left after paying for essentials, e.g. shelter, food and clothing
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| Disposable income - annual |
The income you have left after tax deductions
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Equity release
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Financial products which enable homeowners to raise money from their property – as either a lump sum or regular income, or both – and at the same time gives them, and a partner, the right to remain living in the home until both die or move into long-term care. There are two main products: Home reversion plans and Lifetime mortgages
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| Early redemption charges |
A fee which may be charged to the borrower by a lifetime mortgage lender in the event that the borrower decides to redeem the mortgage early
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| Existing debts |
Financial debts that have yet to be repaid - such as Loans, Hire-purchase, Overdraft, Credit Card balances
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| FSA (Financial Services Authority) |
The independent body that regulates Financial Services in the UK |
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Funding
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Providing money to finance a project
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| Further release |
In equity release terms: Releasing further money from the property at a later date – assuming there is appropriate value remaining |
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Home reversion plan
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An equity release product where you sell all or part of your home in return for a cash lump sum, a regular income, or both. You continue to live in your home until you move into a care home or you die
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Impaired life |
A description of a person who suffers from a medical condition such as heart disease, stroke, long standing breathing problems, liver disease etc. resulting in a shorter life than normal |
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Key facts illustration
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KFI: important information for you from your financial adviser, set out in a format specified by the FSA, so you can compare service, product and costs (make sure you get them and read them carefully)
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Legal fees
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Fees you pay to your solicitor for their services to you
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Life expectancy
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how much longer you’re expected to live
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lifetime mortgage
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an equity release scheme where you take out a loan secured on your home, which is repaid by selling your home when you die or go into long-term care
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Lump sum
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a one-off payment, as opposed to regular income |
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| Maximum release |
The largest amount of money that can be released from your property
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Negative equity
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the amount you owe the lender is more than the value of your home
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| Outstanding debt |
The amount of money owed which remains unpaid
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| Pension |
A regular sum of money paid to a person when they retire. This can be a personal pension and/or a State pension |
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| Pension annuity rate |
This determines the amount of regular income you will receive when you buy an annuity with your pension fund. The annuity rate will depend on many factors, including your age, your health, general economic factors at that time; such as interest rates, any annuity guaranteed period, any regular increase to apply each year (escalation) and how many times and when in each year the pension will be paid |
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| Portability |
Some, but not all equity release providers enable you to move house and take the plan with you |
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| Protected share |
Keeping back a share in your property to leave to your loved ones or to use for a further release at a future date – specifically a home reversion benefit |
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| Redemption penalty |
Fees and costs are normally involved when you choose to cease from an equity release plan earlier than it’s term |
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| Regulated brokers |
From 6 April 2007, equity release brokers must be FSA regulated. They must also carry the following qualifications:
CII (Chartered Institute of Insurers):
- CF1 (UK financial services, regulation and ethics)
- CF6 (Mortgage advice)
- ER1 (Equity Release)
Or
IFS School of finance
CeRER this consists of:
- CeMAP - a combination of UK Financial regulations, Mortgages and Assessment of Mortgage Advice Knowledge
- Equity Release Module - the principles of equity release, the types of equity release schemes available and the applications for which such schemes might be appropriate
From April 2009, a broker cannot offer equity release advice unless they hold one of the above qualifications and are FSA regulated
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Rolled-up interest
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Applies to a lifetime mortgage, where no repayments of the loan are made. The interest applicable on the loan is added to the original loan amount each month and the amount owed accumulates at a faster rate
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| Secured |
The provider secures the property against the loan made. If the loan is unpaid, the provider can sell the home to get its money back.
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| Sell and rent back |
Warning: This is a non-regulated form of equity release and has no guarantee of a lifetime tenancy.
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| Shared appreciation mortgage |
The mortgage provider takes a share in any increase in the value of your home when it is sold and forgoes some or all of the interest payable on the loan
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| Safe Home Income Plans (SHIP) |
SHIP was launched in 1991 to counter mis-selling and to enhance consumer protection. SHIP represents the equity release market and its members include the leading providers of lifetime mortgages and home reversion plans. All members have to adhere to a strict code of conduct over and above that required by the FSA
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| Stamp Duty Land Tax |
A tax payment that must be paid to HMRC when a house purchase is completed, above a defined threshold, that is a certain percentage of the sale price
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