Equity release schemes are schemes which are designed to allow homeowners to release equity from the value of their property as income, a lump sum or as a mixture of both. A reverse mortgage (hipoteca inversa) is one form of equity release which allows homeowners to borrow money against the value of their home, which is used as collateral. Reverse mortgages are generally marketed at retired homeowners who are over 65 years old.
If you are considering an equity release scheme, such as a reverse mortgage or lifetime loan, it is advisable to check that the company offering the mortgage is registered with the financial regulator for the securities markets, the Comision Nacional de Mercado de Valores (CNMV) and that they do not have any warnings issued against them.
A list of financial companies which are not authorised to operate in Spain and those subject to an ongoing investigation is available on the CNMV website.
It is advisable to seek independent legal advice prior to signing any contracts to make sure that you have third-party verification that the information the company has given you is correct, that there are no abusive clauses in the contract and that you are fully aware of your obligations and rights.
Be suspicious of financial companies or agents who try to persuade you into signing a reverse mortgage agreement as a way of avoiding or reducing your tax obligations. If you have any concerns about your tax obligations (for example inheritance tax) you should seek the advice of an experienced professional tax advisor who can advise you independently. Alternatively you may wish to check with the Spanish Tax Office (Agencia Tributaria).
Problems relating to equity release schemes
If you are not happy with the scheme you have been sold, the first step is to submit a complaint to the company responsible for your investment. If, after two months, you are not satisfied with the response or do not receive a response, you are entitled to complain to the CNMV.
Although the CNMV final reports are not binding, they will comment on the conduct of the company or person against whom the complaint has been made. Where the report favours the customer, the company involved is required to notify the CNMV of any action taken to resolve the matter.
If you believe you have been a victim of a fraud involving an equity release scheme you can register a statement with the police and seek independent legal advice on taking action through the courts. Further information for victims of fraud is available on the fraud page.