Is Equity Release Safe?

The facts and the myths.

Is Equity Release Safe?

The facts and the myths.

Is Equity Release Safe?

The facts and the myths.

Is Equity Release Safe?

The facts and the myths.

Is Equity Release Safe?

The facts and the myths.

Common Myths

The biggest concern people have is they’ll no longer own their home. Historically, if you took out a Home Reversion Plan, you would sell your home to the reversion company, either in full or in part. You would then stay as a beneficial owner in your own home for life. However, there are very few new home reversion plans written these days as they’ve fallen out of favour.

The usual way of releasing the value in your home these days is with a Lifetime Mortgage. This is just like a conventional mortgage where the lender has a first legal charge on your home but you always own it. The biggest differences are there’s no fixed term and no repayments are required or expected!

People think they’ll end up owing more than the house is worth. In the event the house is sold for less than the outstanding mortgage, the difference is written off. This is because of the protection provided by the Equity Release Council’s No Negative Equity Guarantee. You won’t leave a debt to your beneficiaries.

It’s a common misconception that with a lifetime mortgage you have to make monthly payments. This is simply not true! There are no expectations for payments to be made and no one will ever chase you to make payments. However, you can choose to make ad-hoc payments if you want to, or you can choose to make regular committed interest payments for as long as you have the mortgage, or until you decide to stop, It’s your choice. However, making any sort of payment will slow down the effects of compound interest.

People wrongly think if they’ve already got a mortgage, they can’t release equity. Again, not true. So long as the planned release is sufficient to pay off the existing traditional mortgage in full, then it can be done.

If there’s a shortfall, but you have access to additional capital to make up the difference that’s also fine. This is one of the biggest reasons people take out lifetime mortgages today. The amount that can be borrowed is solely dependant on the age of the youngest applicant and the value of the property.

The final misconception is there won’t be anything left for your beneficiaries. Most lifetime mortgages have flexibility so you can guarantee a future percentage of the value of your home. However, this will reduce the amount you can borrow now.

The final point to make is that taking equity from your home could affect your ability to continue to claim or make future claims for means-tested benefits, so always check first. Professional equity release advisers will always offer a software check on your entitlements without approaching the Department of Work and Pensions (DWP).

All the terms and conditions, facts and figures of your recommended plan will be in the provided illustration or KFI document.