Safe Home Income Plans

Home Income Plan & Equity Release - Advice & Quotes »

Safe home income plans were developed in response to the “investment” based schemes on the market in the late 1980s which left many elderly people in financial difficulty. These unsafe schemes were structured so that equity was released from the property by way of a mortgage and the capital was reinvested into an investment bond or similar investment. This was meant to provide sufficient income to pay the mortgage payments and also provide the investor with additional income. In principle this worked when investment returns were high and interest rates low but when investment markets slowed and interest rates increased, investors suffered on a number of fronts:-

The value of the investment fell;
The income from the investment also fell;
Mortgage repayments increased;
The property fell in value, placing the investor in the position of having negative equity;
In the worst cases, homes were repossessed and investors left owing more than the value of their home.

These types of schemes were banned in 1990.

Safe Home Income Plans (SHIP) is a company launched in 1991 and dedicates itself entirely to the protection of planholders and the promotion of safe home income plans. It does not, however, offer home income plans or equity release schemes itself.

Leading providers of safe home income and equity release plans support SHIP and are bound by its Code of Practice to ensure that the equity release industry and its investors do not suffer again. The SHIP Code ensures that companies operating in this arena provide investors with information that is easy to understand and outlines both the advantages and disadvantages of safe home income plans and equity release schemes.

All SHIP members must adhere to the following:

To provide a fair, simple and complete presentation of their plans.
To ensure that a client's legal work is performed by the solicitor of his or her choice.
To clearly state the main cost to the householder's assets and estate.
To provide a “No Negative Equity” guarantee, ensuring that you will never owe more than the value of your home.

Members also guarantee that you will:

Have the right to live in your property for life.
Have the freedom to move to a suitable alternative property without financial penalties.
Receive either a cash sum or regular income payments.

The home income and equity release market is particularly complex and is not suitable for everyone. It is important that independent financial advice is sought from a specialist in this area.

Lifetime mortgages as from October 2004 are regulated by the Financial Services Authority. A lifetime mortgage is a loan secured on your home. The loan and interest are normally repaid from the proceeds of the sale of your home when you die or move into long term care. With a home reversion plan you sell all or part of your home for cash. However you do not get the full market return for doing so.

The above equity release mortgage detail is for information purposes only as does not constitute financial advice under the Financial Services and Markets Act 2000. When considering any type of equity release product, it is important that you seek independent legal advice.

THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.