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Understanding Equity Release Scams and How to Avoid Them

Hoca

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Equity release can often provide homeowners with a degree of financial relief and assistance when things are a little tough, or provide them with the resources to further upgrade their home or start to enjoy retirement a little more. Sometimes though, criminal organisations, posing as reputable mortgage lenders or equity release specialists’ prey upon those looking for a suitable equity release scheme. This not only costs the individual vast sums of cash but also puts the ownership of their home at risk too. In this blog, we look at equity release scams and how to avoid them.

What is equity release?​


Equity release is where you get to release some of the cash tied up in your home. Only available to those aged 55 and over, the scheme allows the homeowner to take some of the cash out of their home in the form of a loan whilst still living there. It can be taken as a lump sum, where it is often used for home improvements or helping your children get onto the property ladder for example. Or, it can be taken in regular payments, almost like a wage. This is perhaps ideal if you are retired and just looking for some cash to supplement your pension or help with your living costs.

There are two kinds of equity release, a lifetime mortgage where the loan is paid back via the sale of the house upon death ( or if you move into care) or a home reversion plan where you sell part of all of your home to a home reversion provider for a lump sum or regular payments. You can then remain living there without paying rent. The loan being paid back by the sale of the home. We won’t go into great detail about the schemes in this blog but a qualified and experienced equity release broker will be able to detail which version may work for you if equity release is something being considered. For now, we will look at the common equity release swindles and how you can ensure you avoid them.

Common equity release scams​


Criminals will try almost anything to find a way to your finances, and from email to phone calls and from house visits to websites, they can find a way to convince you that they have your best interests at heart, when in reality they just want your cash. We’ve listed some of the most common scams carried out by criminals posing as equity release specialists.



Fake equity release companies​


A website can be made to look genuine very easily, and criminals can build a site that states all the right things in all the right places to give you the full belief you are reading information provided by a reputable company. They may lure you in with deals or incentives that seem too good to be true, or simply mimic much of what you see on other sites. Always check the site thoroughly and look to see if they are regulated by the FCA. If in doubt, contact the FCA and find out.

Impersonating brokers​


A scammer may take on the role of the broker and explain how they will be able to secure the best deal possible for you. They may request specific personal information that can then be used to clone your identity, or they may require “set-up fees” to have you registered with their service. Much of what they say will appear genuine and often, they may hide behind a screen to help keep their identity a little more secret. The promise of instant decisions, cheap rates, and an offer made “just for you” can often indicate they are looking for your cash, not for your custom. Just like with the websites, do some due diligence and if approached by someone claiming to be a broker, ask for their company information and that you’ll need some time to weigh up your options. You can then use this time to learn more about them.

Inflated fees​


Companies not operating with your best interests at heart will often hide complex terms within the deals which then see you paying extreme levels of interest or unnecessary upfront fees. Whilst upfront fees may be applicable in some cases, the level of them is what should be questioned. You should also look at the interest rate and see if it is comparable with other equity release providers. In addition, see what the repayment terms are. They may include penalty fees for late or missed payments that are beyond the realms of a regular late payment fee.

Confusing or missing terms and conditions​


We all know that financial paperwork can contain a lot of jargon that can easily confuse people. Equity release scammers will prey upon this lack of knowledge by providing a hugely complex set of t’s & c’s that leave you muddled. Buoyed by their convincing sales patter, you believe the terms are correct and favourable, when in fact they commit you to excessive fees or even commitments, which become legally binding but not even relevant to the equity release scheme.

In some cases, due to the complexity of the terms, some scammers may not even provide full information, and use “simplicity” as a sales technique when in fact these missing terms leave you vulnerable.

Pressure tactics​


We’ve all had a salesperson try to convince us that the deal they have is the best possible and, in some cases, we accept their word and go for it. This can be great when dealing with a legitimate company but when it is a scammer, their efforts at convincing you this is a “one-time offer” or a special deal for new customers should be taken with a pinch of salt. They will often pressure you into signing a contract or paying a specific fee sooner rather than later to secure the best deal. A real equity release provider or broker would not do this and would instead allow you time to assess your options.

Phishing scams​


Perhaps one of the most common scam types is phishing. This is where the fraudsters will send emails or make phone calls posing as an equity release company. They will convince you of their credentials and have answers to many of your questions. They will then, over the course of the call or the email conversation, gain your trust and seek to obtain personal information or payments. Once they have your money or your information, you’ll never hear from them again.

How can these equity release scams be avoided?​


With the right level of due diligence and remaining resolute, you can avoid being defrauded by equity release con artists, but it is easy to get fooled. These criminals have spent time perfecting their crimes so can very easily appear genuine. Following the steps below can help you avoid being robbed of your money or having your identity stolen.

Verify the credentials of the company​


If we see something and it appears to look genuine, in most cases, we take it as genuine. This can often be our undoing. Whether you have a phone call, receive an email, or are on a website, before committing to anything, verify that the company you are dealing with is genuine. Ask for their FCA number and ask whether they are regulated. They will, of course, provide you with this information but now armed with it, you can go to the FCA the Equity Release Council and verify it. If all is genuine, great, if it’s not, steer clear and report the company.

Carry out research​


Research the broker or equity release provider before committing to anything. Look for online reviews, search them on companies house and see whether there are any glaring red flags on their website. You could even Google their phone number and see if it is flagged as a common number used for scams.

Seek advice from mortgage professionals​


By speaking with an experienced and respected mortgage advisor, they will be able to point out anything that may appear obvious to them but not so much to you. They will be able to see if the offer is genuine or whether the company shows any signs of being fraudulent. With unbiased advice provided, you can remain confident in their assessment of the equity release provider or broker.

Avoid unsolicited offers​


If you are called or visited by someone claiming to be a broker or lender, the chances are, they are not who they say they are. Most equity release providers will not come knocking on doors or cold call. If this happens, they are best avoided.

Avoid upfront fees​


As we mentioned earlier, the promise of special deals or bespoke offers that can only be secured with immediate payment is not something you should give any time. If you are asked for money before anything is signed, checked and verified, it would appear it is a scam. Genuine lenders and brokers will not demand high levels of payment before any contract is signed.

Read all the small print​


Yes, it is boring, but this is where scammers come into their own. They will hide lots of legally binding terms within these parts and it is here where you could be exploited. High interest, set-up fees, payment schedules and more could all be set up to compromise your position. Once signed, you may have no comeback.

Request everything in writing​


If you have everything in writing, you can safeguard yourself against verbal misrepresentation. Whilst having it in writing doesn’t necessarily mean it is fully legal, you can take these documents to a solicitor if you prefer and have them double-checked for their compliance.



Equity release can be a great way to free up some cash, but it can come with risks. Especially if you inadvertently choose the services of a criminal business. Securing a great equity release deal can be achieved with reputable, FCA-registered companies. This not only gives you full peace of mind but ensures the advice you receive is both genuine and professional and tailored to your needs.
 
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