Property Income Plan and Equity Release

maximuss_2

[FONT=&quot]Having read some of the comments on the subject of the Property Income Plan, I can see why so many people might be concerned. I must at this point say that I am also a Financial Advisor who has been approached to recommend this plan. Like so many other advisor's I am waiting to see the small print before taking the proposition further, but I must admit I do like the idea in principle. [/FONT]
[FONT=&quot]However, can we all first remember this is a new idea like so many before which have been greeted with sceptism and yet have proven to be good prodcucts. Can we also take note that this plan is not for everyone and the duty of an IFA is to make sure the product is suitable.That is why IFA’s and mortgage brokers have been chosen to promote and sell this product.We have the skills and compliance proceedures in place and know the consequences of not following the correct processes.[/FONT]
[FONT=&quot]Financial Advisors are like anyone else in Society, we have families,mortgages and homes just like most people.We dont want to risk our lively hood and reputation for the sake of a quick buck.Some have suggested that we are in it for the money and might not care too much about the advice we give.Not true. I accept that there are bad advisors in this business as I accept there are bad Solictors, Accountants, Doctors , Teachers, Police officers... need I go on? If your advisor recommends this proposition to you, keep an open mind. You do not commit to anything until you have had the opportunity to assess the plan, have your own independent Solicitors check through the small print, and advise you accordingly. [/FONT]
[FONT=&quot]At this time, no one has had the opportunity to read the full legal documents to see just how this plan works in practice. The mechanism for releasing the charge is not yet crystal clear.When it is I will decide if this is something I want to recommend to my clients, but until then I will continue to talk to them about the possibility of a plan where you can earn an income for leasing a charge on your property. [/FONT]
[FONT=&quot]I will then earn a commission for the advice I give, which is comparible with the commission earnt for the sale of a pension, a bond or other investments. It is also similar to what a Bank would earn for a similar arrangement through them[/FONT]
[FONT=&quot]The concept is simple. If you own a property without a debt, someone is willing to pay a fee to utilise your property deed. You retain full ownership and the deal lasts for 3 years. If you want out you lose 3 months income that you would not have had in the first place.If you want to raise finance against your property then perhaps this is not for you. If you decide later to sell the property or raise finance on it you lose 3 months interest.Sounds too good to be true? Maybe, time will tell, but this is not free money, this plan only works for those who own their property without debt and in exchange for the use of your equity.[/FONT]
[FONT=&quot]The Capital Requirements Directive/Basel 2 is nothing new.If the new rules allow an Insurance Company to increase thier capital adequacy in this way and it is legal there is little risk to the property owner.[/FONT]
[FONT=&quot] [/FONT]
[FONT=&quot]Unlike mortgaged property where the lender sold their mortgage book on to investors this is not the case here and should not be talked about in the same way. There is no creation of a debt and no one actually takes an equity stake in the property unlike an equity release scheme or a home reversion plan.[/FONT]
[FONT=&quot]If you dont need or want the money, dont do it, but dont deny those who do the opportunity for some extra income. [/FONT]

Doc_N

maximuss wrote: »

[FONT=&quot][/FONT][FONT=&quot]The concept is simple.

If you own a property without a debt, someone is willing to pay a fee to utilise your property deed. You retain full ownership and the deal lasts for 3 years. If you want out you lose 3 months income that you would not have had in the first place.If you want to raise finance against your property then perhaps this is not for you. If you decide later to sell the property or raise finance on it you lose 3 months interest.

Sounds too good to be true?

Maybe, time will tell, but this is not free money, this plan only works for those who own their property without debt and in exchange for the use of your equity.[/FONT]
[FONT=&quot]The Capital Requirements Directive/Basel 2 is nothing new.If the new rules allow an Insurance Company to increase thier capital adequacy in this way and it is legal there is little risk to the property owner.[/FONT]

[FONT=&quot]Unlike mortgaged property where the lender sold their mortgage book on to investors this is not the case here and should not be talked about in the same way. There is no creation of a debt and no one actually takes an equity stake in the property unlike an equity release scheme or a home reversion plan.[/FONT]
[FONT=&quot]If you dont need or want the money, dont do it, but dont deny those who do the opportunity for some extra income. [/FONT]

Sorry to have to pick out a couple of phrases from yet another first time poster in this thread - but:

1 The concept is by no means simple - it has yet to be properly explained what the benefit is for the entity paying the 'interest'.

2 It's a well known phrase in normal financial circles that if something sounds too good to be true, it is too good to be true.

I'd be in a perfect position to take up one of these plans, because it looks so much like money for nothing. But it won't be. Things are never that simple. This puts me in mind of pyramid selling schemes, and any number of money for nothing schemes, all of which went badly wrong - except of course for the promoters and the IFAs.

Reaper

Just a reminder that people interested in this ought to listen to the Moneybox programme. You can find it here and the Equity IQ part starts at 8 mins 30 secs if you want to fast forward to it.
http://www.bbc.co.uk/iplayer/console/b00tjvxk/Money_Box_04_09_2010

Arthurian

What's been puzzling me is "you retain full ownership" and yet the insurance companies are doing this to add equity to their books. Perhaps the answer is how you define ownership? Perhaps the insurance companies are granted a licence to use half your property as they see fit, although technically speaking the property is in your ownership. Like professional photographers can give you a licence to use the photos they took of you as you see fit, but technically the copyright still belongs to them? Only a guess... If this was true, where would it leave us? Investigating the terms of the licence, I suppose.

Perhaps using such a licence, an insurance company might be able to swallow up half the value of your home, taking that money for some other purpose, and possibly, if things go pear-shaped, leaving you with a mortgage to pay on half the value of your home.

Let me emphasise this is an uninformed guess. If anyone else can tell me how it works, please do.

maximuss_2

Doc N.
I did say the concept is simple. You can if you wish make this as complex as you like. How many people I wonder actually understand the house buying process in its most intricate detail? How many understand the process of a charge on a property with a mortgage lender and what it means? I know from experience that the vast majority of people, once they have their mortgage agreed do not concern themselves with the legal process. What they want to know is "How much will it cost me to buy the house I want" How many then take the time to understand the conveyance of land , very few in my experience. They trust the legal process to get this part right.
The concept is simple. You use the equity in your property to provide an income.Simple.How much you want to understand after that is down to the individual and it is their right to scrutinise the deatils as much as they like and take as much time as they like.
Sounds too good to be true? As I have said, wait and see. This might not be for you or many others. However, please dont forget this opportunity is only, at the moment anyway, available for those who own their property outright. It is a business transaction with a mutual benefit for all concerned.It is not pryramid selling, there is a need for the insurer, there is a proposition on the table and the customer has a choice.If you dont like the sound of it, fine dont do it. I do know of several Solicitors already who have signed up for this plan (in principle) who see the merits of the plan but they wont commit totally until they see the legal contract, I recommend we all do the same.
Finally, I dont understand why you feel the need to refer to me as a “yet another first time poster” are my comments less valid because I am not a founder member of this thread?

maximuss_2

Another 1st poster puffing this product ... hmmm, smells of desparation.
This is a discussion forum, not advice, my opinion is worth what you paid for it - take it or leave it but if it waddles and quacks, it's a duck in my book!

I must confess I dont understand this obsession with referring to 1st time posters,does it matter? Would you allow me to make a couple of thing's clear. I am not "puffing" this product, I am keeping an open mind until I see the full facts. I cant speak for anyone else but I am certainley not desperate to promote this product over any other products, but I do have information which is leading me to think this could be a very welcome solution to some peoples income problems if only for an interim period.When I have the facts I will make my assessement then.

Baz_2

Of course it matters, it suggests you are biased therefore your post needs to be view with a air of caution. You obviously are involved in selling this product or have a vested interest in it. How many first time posters do you see registering to slate the idea?

Also, you cannot compare this to house buying as that process has been around for many years and everyone is aware of the risks involved.

This scheme, so far, the risks are hidden.

maximuss_2

Anyone with a mortgage on their home still owns their home, the lender does not, and yet there is a debt on which the lender takes a charge over the property. This concept is similar in some ways only there is no debt.

wkinni99

Anyone actually got an insurer on board?

maximuss_2

Exactly my point. The risks are hidden which is why we should wait until the contarct is available. I have a vested interest? Maybe, but not by promoting it on this forum. This proposal is very new and in fact has not been launched yet which is why you are perhaps seeing so many new posters. Unfortunatley the doubting Thomas's of this world only see the problems, and yet they cannot pin point out the the particular risk. Wait and see is all Iam saying, I too want to make sure that this plan is water tight before I sign up my dear old mum. On the subject of house buying, yes it has been arounf for years and people should know the risks. Unfortunatley, they do not in many cases, which is why some hold property as joint tenants when they should be holding the property as tenants in common and vice versa, just to illustrate one area of a lack of understanding.A lot of people dont care that much, they want to buy a house, with a mortgagae, but beyond that they rely on the system giving them full protection and therefore do not trouble themselves with reading the small print.