Equity release myths​ – debunking the truth

Sep 8, 2022 | Equity Release

While equity release has become a well-favoured solution for homeowners in recent years, there are still plenty of conversations in the industry about whether or not equity release is the right decision. When you are in a position to consider releasing money from your home, you might question the uncertainties and wonder about the best route to take.

Below, we will debunk some of the most common myths discovered when researching the ‘dreaded’ equity release - fear not, it is not as scary or worrisome as you may have thought! With the most equipped mortgage advisors guiding you through the process, you could receive a brilliant offering that helps to support you or your family without any concerning consequences.

Introducing the lifetime mortgage

A lifetime mortgage is the UK’s most popular type of equity release scheme, which allows homeowners to access an amount of the home’s wealth in the form of a tax-free lump sum. This sum, plus any accrued interest, is only required for repayment upon your death or moving into long-term care after you sell your property.

Will I no longer own my home?

Equity release is not the official sale of your home. You will remain the owner and will only be borrowing against it. A lifetime mortgage has no fixed end date, and the mortgage remains as long as you remain living at the property.

Will I owe more money than my home is worth?

You must ensure your equity release plan is taken out with a provider approved by the Equity Release Council, establishing a no-negative-equity guarantee that will never allow you to owe more than the value of your home after the sale.

Although very unlikely, if a home sells for less than the mortgage, the remaining balance becomes a write-off. Once repaid, any remaining funds from the property sale will go to you or any beneficiaries mentioned in your will.

When speaking to an equity release adviser, you will have the opportunity to calculate how much you need to borrow based on your plans and desires. Naturally, it’s tempting to borrow more than you need, but be responsible when considering the future of your estate.

It is important to discuss with your adviser how much you need immediately and how much can be left for a future drawdown, so you are not being charged unnecessary interest on future spending.

Can I release equity from my home if I still have a mortgage on the property?

A mortgage does not limit you from releasing equity from your home, however the mortgage must be repaid with the lifetime mortgage. One of the most common reasons to release equity is to pay off an existing mortgage, or to use this as a new mortgage to move home, perhaps relocate to an area you have always dreamed of living in, or move closer to family.

Will I have anything left for my loved ones?

In recent years, releasing equity through a lifetime mortgage has become less stressful and more flexible. There are now numerous options available which allow you to protect a portion of equity exclusively for inheritance. While it will mean less value in your home to borrow against, once you pass away, you can feel assured that portion will go to your loved ones.

For some, having the opportunity to experience your loved ones enjoying their inheritance while you are still here is lovely. If you want your family to receive financial support before you die, you could use equity release for an early inheritance plan.

Is equity release a more expensive way to borrow?

Clients can find peace in how cost-effective lifetime mortgages are in today’s world, thanks to how much equity release has risen in popularity. There are so many more options to choose from, and most are not as expensive to borrow as sellers might initially expect. The interest rate will depend on the house value, your age and the plan you select. Regardless of your situation, an incredibly possible benefit of a lifetime mortgage is that a fixed rate can be locked in for the full lifetime of the mortgage.

We can help you seek equity release without worries or limitations

Our team will take the time to visit you at your home, and also offer the opportunity to visit us at our office where we can educate you and your family on lifetime mortgages with no obligation from us to proceed.

Get in touch with us today to learn more about how we can support you on your journey and uncover the best options depending on your situation and finances. We are here to help you and your loved ones through any stress or difficulty.

 

A lifetime mortgage is a long term commitment which could accumulate interest and is secured against your home. Equity release is not right for everyone and may reduce the value of your estate