What is Equity Release?
Equity release is any product that converts savings locked up in the family home into cash that can be used for any purpose.
SEQUAL members offer two kinds of equity release product — the reverse mortgage and the shared sale agreement.
A reverse mortgage is a loan against the family home with no repayments. Interest costs are added to the loan, increasing the balance over time. The loan is typically repaid from your estate.
Under Federal law introduced in 2012, known as a 'no negative equity guarantee', the proceeds from the sale of the home will always be enough to repay the reverse mortgage in full, regardless of how long you remain living in the home.
A shared sale agreement is a different form of equity release and is not a loan. The home owner receives a cash lump sum today in return for an agreed share of the proceeds of the sale of the home. Shared sale agreements are also designed to be repaid from the homeowner's estate.
Reverse mortgages and shared sale agreements are endorsed by SEQUAL because they respect the right of senior homeowners to remain in their home for life. The senior homeowner cannot be forced to sell in any circumstances.
Other forms of equity release product have recently appeared on the Australian market. These include fractional property investment and peer-to-peer agreements that create a loan or option over the senior homeowner’s property. These products do not meet SEQUAL’s consumer protection principles.