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Equity Release Scheme

For the elderly equity release schemes can prove a useful financial tool; providing, as they do a way in which the equity in property can be released to provide extra security in retirement.

1 September 1998

Equity Release Scheme

For the elderly "s" can prove a useful financial tool; providing, as they do a way in which the equity in property can be released to provide extra security in retirement.

Many readers will be aware of one such product that has recently been launched by Barclays Bank. The "shared appreciation mortgage" enables clients to borrow up to 25% of the value of their property. No interest is payable, rather when the property is sold Barclays receive the full lump sum plus a percentage share of the (hopefully) increased value of the property.

The Risk Improvement Unit at the Solicitors Indemnity Fund has identified a potential problem. The product is promoted on the basis that the loan will not be called in until an "event of termination"; such as the death of the sole borrower or last remaining joint borrower. However, the mortgage document actually provides for the Bank to demand repayment at any time after the first m...

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