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6 equity release myths explained

Last updated 1st March 2024

3 min read

There are some common misconceptions around equity release. We’re here to set the record straight, so you can decide if it could be for you…

1. Myth: “Equity release is unregulated”

Reality: Equity release providers are regulated by the Financial Conduct Authority (FCA).

2. Myth: “My family will be left in debt”

Reality: If your provider is a member of The Equity Release Council and meets all their standards, your plan will be fully protected by a ‘no negative equity’ guarantee. So you’ll never owe more than what your home is worth.

The loan will be repaid from the sale of your home, either when you pass away or move into long-term care.

But it’s worth keeping in mind that releasing equity may mean there’s limited or no property equity remaining. This could reduce your financial options in the future.

And if your house was to fall in value (meaning the sale of your property wasn’t enough to repay the plan), any debt would be written off when it’s sold.

3. Myth: “My family won’t get an inheritance”

Reality: While you won’t be able to leave your home behind for your loved ones, the money from its sale will be used to pay off your loan. Anything leftover will go to your estate.

It's worth remembering, however, that the compound interest that builds up on your equity release loan could leave little or none of your home's value for your loved ones.

You may be able to ringfence some of your home’s value to leave as inheritance – just make sure to tell your equity release adviser you’d like to do this.

4. Myth: “I’ll have to make monthly repayments”

Reality: You won’t need to worry about making payments every month. Instead, everything can be sorted from the sale of your home when you pass away or move into permanent care.

There are equity release products that come with the option to make regular repayments to help reduce the total cost of borrowing. Even if you’re only able to make small repayments, it will help reduce the amount of interest you pay over the lifetime of your loan.

Your equity release adviser will be able to help you decide what type of product is right for you. They’ll discuss your circumstances, including your day-to-day and future income and outgoings. This will help to clarify if equity release is the right option for you.

What’s more, providers that meet Equity Release Council (ERC) standards now also include more protection if you choose a lifetime mortgage with mandatory repayments.

5. Myth: “I could lose my house”

Reality: As long as your chosen equity release provider meets Equity Release Council standards, you and your partner both have the right to live in your home for as long as you want.

Depending on the type of plan you take out, you can still either fully or jointly own the property.

For example, with a lifetime mortgage, you’ll still be the legal owner of your home. Whereas with a home reversion plan, you’ll sell part or all of your home in exchange for a cash lump sum – and live there rent free until the house is sold when you pass away or go into long-term care.

6. Myth: “I won’t be able to move house”

Reality: As long as your chosen equity release provider meets Equity Release Council standards, then your plan can be transferred to a new home (subject to criteria).

Find out more about equity release

It’s important to get expert advice from a qualified adviser before you consider equity release, as there may be other options that are more suitable for you.

Want to know more about equity release? Read about the pros and cons, see how much you could release with our calculator, or find out if you’re eligible – it’s all free.

The thoughts and opinions expressed in the page are those of the authors, intended to be informative, and do not necessarily reflect the official policy or position of SunLife. See our Terms of Use for more info.