EQUITY RELEASE MYTHS
Common Misconceptions of Equity Release
Equity release is more popular now, than it was ten years ago, however many people still don’t really know what equity release is or how it may be able to help you achieve your goals.
Below are some misconceptions that may lead people to overlook equity release as an option. However, as the market has developed and modern plans offer a wider range of flexible features than in the past, equity release may be one of the choices people consider as part of their later‑life financial planning.
The majority of the plans we recommend are lifetime mortgages, and offer a no negative equity guarantee, so you’ll never owe more than your property is worth when it’s sold.
With some equity release plans, you can opt to protect a percentage of your home’s value to guarantee an inheritance to your loved ones. This may limit the lenders who will offer you a plan, and it will reduce the amount available for you to release. This is something you can speak in detail about with your adviser.
With a lifetime mortgage you continue to own 100% of your home. A lifetime mortgage is a loan secured against the property (like a standard mortgage you may have taken when buying your home), and it is repaid, along with any interest that has built up, when you either move into long term care or pass away.
You can apply for a home reversion plan, which is when you sell all or part of your home to a lender (for less than market value). You will still retain the right to remain in the property for life.
Yes you can, and one of the top reasons for using equity release is to repay an existing mortgage.
You need to consider if equity release is the best option for you to do this, and this is something your adviser will discuss with you.
There are cost considerations to think about when deciding whether equity release is right for you.
You don’t have to make repayments to a lifetime mortgage, but any interest you choose not to repay will be added to the loan each year. Because of this, there may be other options that are more cost‑effective depending on your circumstances. Your adviser will discuss these with you, and you’ll see the details clearly set out in your personalised recommendation pack.
The advice and recommendation provided by our specialist advisers — including an initial fact‑finding appointment and your tailored recommendation pack — is free of charge, with no obligation to proceed. If you choose to apply and your case completes, a fixed fee of £1,695 will become payable. Your adviser will support you throughout the whole process, right up to when you receive your funds.
There are standards in place for equity release providers to work within, and lenders offering them have to follow these requirements.
All advisers must be fully qualified to be able to give you honest, clear advice. Our advisers are also passed through a training course to ensure they meet our specific advice standards, as well as receiving continual monitoring.
We’re members of the Equity Release Council, who are a governing body established to ensure standards and safeguards are in place within the sector, to give both advisers and consumers’ confidence in the products available to them.
You must also speak with an independent solicitor before releasing equity to ensure you have fully understood the long-term risks, obligations, and legal implications of the chosen equity release product, and to ensure that you are not being pressured into releasing any money.
The plans we recommend all meet the Equity Release Council’s standards, one of which includes Portability. This means that you are able to transfer your plan to another property, provided it meets the lender’s criteria. There may be certain terms and conditions applicable to the new property, which you should discuss with your lender before committing to a property purchase. You may also be required to pay some or all of your loan and be subject to early repayment charges.
Some plans include a ‘drawdown’ facility, which allows you to release an initial amount from your home and then access further funds in the future if you need them.
With a lifetime mortgage, interest only starts on the money once you take it. The rate you receive at each release will be the rate available to you at that time, and it will then be fixed for the life of that part of the loan. This rate may be higher or lower than the rate applied to any earlier funds you released, and higher or lower than rates available in the future.
Our advisers are committed to giving you the best advice for you, which is why they take time getting to know you, your circumstances and your objectives. If they believe that equity release is not in your best interests, for example if it’s cheaper to get a loan or you are likely to repay it too early and incur high early repayment charges, they will tell you and recommend against equity release.
Our advice and recommendations are free, and you’re never under any obligation to proceed. If you do decide to release equity from your home, and only when your case completes and you receive your money, will our fixed fee of £1,695 be payable.
We provide initial advice for free and there is never any obligation to proceed. Only when your case completes will our advice fee of £1,695 become payable. Other lender and solicitor fees may apply.
Equity release may involve a lifetime mortgage, secured against your property, or a home reversion plan. It will reduce the value of your estate and impact funding long-term care.
Equity release requires repaying any existing mortgage. Money released, plus accrued interest, would need to be repaid upon death or moving into long-term care.
Advice is required to proceed with equity release and there may be other options which better suit your circumstances.
If you’d like to explore whether equity release could support your financial plans, you can start by checking your eligibility and seeing how much you might be able to release.