Dispelling the Myths of Equity Release

Mention the words “equity release” and many people will immediately dismiss it. 

This is understandable as historically there has been a lot of bad press and the original products did leave some people vulnerable.  As a result, several myths have evolved within the equity release market and these are as follows:

  • You could lose your home
  • You won’t own your home any longer
  • You can’t move to another home
  • Your family will be left with a debt
  • It is unsafe and unregulated
  • If one of you dies, the other one will be made homeless
  • You won’t be able to leave an inheritance

The safeguards set out by the Equity Release Council have been designed to overcome these areas of concern.

  • You have the right to remain in your property for life, provided the property remains your main residence
  • With a lifetime mortgage you will continue to own your home
  • You have the right to move your plan to another suitable property if the property meets the lenders’ criteria
  • If the property is sold because of death or long-term care; you will never owe more than the value of your home and no debt will ever be left to your estate.
  • If the plan is in joint names, you can remain in your home until the second of you die or goes into long term residential care
  • If the property is sold as a result of death or long-term care, anything left over after the loan and costs are repaid, goes to your estate.

There are two types of equity release, a lifetime mortgage and home reversion.

Although these products are regulated by the Financial Conduct Authority, the main driver for the changes with regards to safeguarding the consumer has been with the Equity Release Council (formerly known as SHIP).  The Equity Release Council is the trade body who sets the standards for the industry for both providers and advisers, who must adhere to set guidelines and principles which protect the borrower.