Jargon buster

No-one likes jargon, especially when it comes to talking about your money.

At Bower, we want to be absolutely sure you’re clear about everything we discuss so you can make an informed and confident decision about your equity release.

So if you’ve read or heard anything about this that you want explained or clarified, then just pick up the phone and talk to us.

In the meantime, here’s our A to Z guide to some of the most commonly questioned words and phrases about equity release (and all the jargon for interest-only mortgages!).

Adviser

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

Annuities

This refers to a regular payment that’s made to individuals in exchange for a sum of money (normally associated with pension plans).

Care Fees Annuity

Also referred to as Care Fees Payment Plans, Immediate Needs Annuity, or Immediate Care Plans. These involve paying a single lump sum to an insurance company who then pay an agreed tax-free amount at regular intervals, usually 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. Please note that if the income is paid to the plan holder then there may be a liability for tax.

Compound Interest

Instead of regular mortgage interest payments, interest is added to the original loan amount and this then accrues over the term of the mortgage. So this means you pay interest on the interest charged – this is compound interest.

Consultation

This is a free meeting with an equity release adviser so you can assess whether equity release is right for you.

Conventional Mortgage

A typical mortgage provided by a bank or building society. These differ from lifetime mortgages as there are no end term repayments.

Drawdown

A lender offers a loan amount which can be borrowed in stages as you choose. Interest is only charged once you use (drawdown) the money.

Drawdown Lifetime Mortgage

This is a Lifetime Mortgage that’s set up on a standby or flexible basis, so you can release funds whenever they’re needed. Find out more in our Lifetime Mortgages section.

Early Repayment Charges (ERC’s)

Most lifetime mortgages have a fixed interest rate for life, so a penalty – or Early Repayment Charge – may be applied if the loan is repaid before you pass away or move into permanent long-term care. Some plans let you repay the loan without any ERCs, but your adviser can talk you through this option.

Enhanced plans

These plans take into account factors such as health condition and lifestyle when determining how much cash you can release or the interest rate charged. For example, if you smoke or have certain medical conditions you may be eligible and therefore release more cash. If you’re not intending to release the maximum amount of cash it could mean you’re charged a lower rate of interest.

Equity

This is the value in your home after deducting any outstanding mortgages and secured loan balances if you have any.

Equity Release

A method of releasing capital from the value of your home without the need to make any monthly repayments (unless you choose to do so). With Equity Release there is no date to repay the loan.

Equity Release Council

The Equity Release Council (formerly Safe Home Income Plans, SHIP) is the official organisation set up to safeguard the interests of consumers entering into equity release plans.

Estate

This is the value of your assets minus liabilities. This can include property, savings and personal effects.

Fixed Rate

The rate of interest chargeable on a Mortgage. This is normally fixed for life with Lifetime Mortgages.

FCA

The Financial Conduct Authority is the Government Body that regulates equity release companies and advisers (it was formerly known as the Financial Services Authority, FSA).

Home Reversion plan

This is an equity release plan where you sell a share in your home to a company in exchange for a lump sum or series of payments. No rent or interest is payable.

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.

Independent Equity Release Advice

An independent equity release adviser can select plans from the entire market and is not tied to one company. This means they can recommend the best and a suitable plan from the from researching all the lenders in the market.

Initial Disclosure Document

This is a document given to you by a financial adviser that clearly and simply sets out the key facts about their services. It details how much is charged, if a company is independent or tied to a company and your rights as a consumer including what protection you have.

Lasting Power of Attorney

This document lets you authorise a person or persons to manage your affairs. You can empower them to make important decisions on your behalf when you are unable to, or choose not to, make them for yourself.

Lifetime Lease

This lease provides security of tenure to you for life when you enter into a Home Reversion plan.

Lifetime Mortgage

This is a mortgage you don’t have to repay before the end of the last plan holder’s lifetime. Repayment is due when the last person named on the plan leaves the property (so they could simply move home, move into care or pass away).

No Negative Equity Guarantee

This simply means that you will never owe more than the value of your property.

Personalised Illustration

This is a quotation for an equity release plan set out in a format that’s been approved by the Financial Conduct Authority. This is also known as a ‘Key Facts Illustration’.

State Benefits

The means-tested and non means-tested allowances you might be entitled to.

Survey/valuation

This is a valuation of your home by a surveyor on behalf of the equity release plan provider.

Top-ups

These are further release of funds after the originally agreed amount has been spent. A new application has to be made with a requirement for further advice.

Whole of market

Bower Retirement offer you equity release plans from all of the equity release lenders in the UK, or ‘whole of market’.