Equity release is becoming increasingly popular among homeowners looking to access the cash tied up in their properties. However, with its rise in popularity comes a host of misconceptions that can lead to confusion and hesitation. In this article, we’ll debunk some of the most common myths surrounding equity release, helping you make informed decisions.
Myth 1: You Lose Ownership of Your Home
Table of Contents
- Fact: One of the biggest myths is that you will lose ownership of your home when you take out an equity release plan.
With a lifetime mortgage, you retain full ownership of your property. You can continue to live there as long as you want, and you have the right to sell it at any time. Only when you pass away or move into long-term care is the loan typically repaid, often through the sale of the property.
Myth 2: Equity Release is Only for People in Difficulty
- Fact: Many people assume equity release is only for those in financial difficulty.
It is a legitimate financial tool available to homeowners, typically aged 55 and over, looking to enhance their retirement lifestyle. Whether you want to fund travels, home improvements, or support family members, equity release can provide a tax-free cash injection to improve your quality of life.
Myth 3: Equity Release is Complex and Difficult to Understand
- Fact: While equity release products can seem complex, they are designed to be transparent and understandable.
Reputable providers are required to explain the terms clearly, and you will receive independent legal advice before proceeding. By working with a qualified financial advisor, you can navigate the process and ensure you fully understand your options.
Myth 4: You Will Incur Huge Debts
- Fact: Many believe that equity release will lead to unmanageable debt.
While it’s true that interest can accumulate if you choose to roll it up, responsible planning can mitigate this risk. Most equity release products come with a “no negative equity guarantee,” meaning you won’t owe more than your home is worth when it’s sold. Additionally, you can choose to make interest payments, reducing the total debt over time.
Myth 5: You Can't Move House
- Fact: Some people think that once they opt for equity release, they are stuck in their current home.
This is not the case. You can move to a new property, but you must ensure that the new home meets the lender’s criteria. If you choose to downsize, the existing plan must be settled, which may involve repaying the loan.
Myth 6: Equity Release Affects My Benefits
- Fact: While equity release may impact eligibility for certain means-tested benefits, it’s not a blanket rule.
The cash you receive could affect your income level, which may have implications for benefits like pension credit. However, it’s advisable to consult with a financial advisor to assess how releasing equity may impact your personal circumstances.
Myth 7: Lifetime Mortgages are Only for Older People
- Fact: Equity release products are available to people from 55+, not just people in later life who need to top up a dwindling pension.
A lifetime mortgage isn’t just for homeowners in their 60, 70s and beyond. Once you reach 55 years old you may be able to access the equity in your home to finance an early retirement, support family members, or fund university for your children.
Myth 8: All Equity Release Plans are the Same
- Fact: There is a wide variety of products available, each with different terms, conditions, and features.
It’s crucial to research and compare options to find the product that best suits your needs. Working with a qualified advisor can help you navigate the different choices available and ensures that you receive the right advice and information.
Myth 9: Is Releasing Equity from your Home a Last Resort?
- Fact: Many people believe that this type of mortgage is only suitable for those facing financial difficulties or as a last resort option.
A lifetime mortgage is a proactive financial strategy that can enhance your lifestyle. Many homeowners choose equity release to fund travel, hobbies, or home renovations while they’re still able to enjoy the benefits. It can be part of a broader financial plan to help you live comfortably in retirement.
Myth 10: You Can't Change Your Mind Once You've Released Equity
- Fact: Some individuals think that once they’ve committed to a plan, they cannot change their minds or make adjustments.
While it’s true that a lifetime mortgage is a significant decision, many providers offer flexible options. Depending on the terms of your plan, you may have the ability to make partial repayments or even switch to a different plan if your circumstances change. Always check the specific terms of your agreement and consult with your advisor to understand your options.
And Finally...
Equity release can be a valuable financial tool for many homeowners, but it’s essential to separate fact from fiction. By dispelling these myths, you can approach this type of borrowing with a clearer understanding and make informed decisions that align with your financial goals. Always consult with a qualified financial advisor to explore your options fully and determine the best course of action for your unique situation.
Releasing Equity From Your Home
If you are aged 55+ and have equity in your home, you may be able to release some of it through equity release in the form of a lifetime mortgage to realise the ambitions you have for later in life.
Plans can provide you with a lump sum that is secured against your home. Interest is charged when you borrow money in this way, and will depend on the equity release products that you can access.
Whatever your reasons for releasing equity from your home, it is important to seek professional financial advice. There are strict rules and criteria around the different types of equity release, which is regulated by the Financial Conduct Authority (FCA). The equity release sector is represented by the Equity Release Council, which exists to promote high standards of conduct and advice on equity release, safeguarding consumers.
Equity release services are referred to a third party. Equity Release Mortgages are Regulated by the Financial Conduct Authority