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Is equity release safe?

Simon Stanney - Equity release director

Simon Stanney

Equity Release Director

Last updated 3rd April 2020

The Equity release market is regulated by the Financial Conduct Authority, which enforces strict rules and codes of conduct. This means that there is significant consumer protection in place – whether you choose a lifetime mortgage or a home reversion plan.

Additionally, the Equity Release Council, (ERC), is a trade body that represents providers and ensures safeguards such as a no negative equity guarantee for equity release plans.

Taking out equity release is a big decision, read on for more about myths, and how to get the right equity release advice.

It is always important to remember that any inheritance you want to leave will be impacted and any means-tested benefits could be affected.

Use our 60 second equity release calculator

Use our 60 second equity release calculator

Use our equity release calculator

Use our 60 second
equity release calculator

Release tax-free cash from your home

Does equity release offer any other safeguards?

Equity release plans are safe because they are regulated and offer certain protections.

In the past, this was different as the schemes weren’t regulated.

What does being regulated mean?

Because the FCA regulates equity release products, all advisors, brokers and lenders must get permission from the FCA to conduct their business. The FCA also has strict codes of conduct and rules that equity release providers must follow.

Equity Release Council

The Equity Release Council is a trade body that represents the equity release industry

All members have to adhere to the Council’s Statement of Principles.

These include:

  • No negative equity guarantee, which means you will never need to pay back more than the value of your home. It also gives you the freedom to transfer your scheme to another property without penalty, subject to the lender’s terms and conditions.
  • You are required to receive financial and legal advice.
  • “Security of tenure” means you can stay in your home for life.
  • For a lifetime mortgage, interest rates must be fixed or variable. If they are variable there must be an upper limit which is set for the life of the loan.

*Information sourced from equityreleasecouncil.com

Our preferred partner, Age Lifetime, are an appointed representative of Age Partnership, and are members of the ERC, so you will be protected with their safeguards.

couple in their kitchen talking

Equity release myths

Myth - It's unregulated

All equity release providers and advisers are regulated and supervised by the Financial Conduct Authority (FCA) – which regulates and protects to put your mind at rest.


Myth - I can't leave an inheritance

Even though you won’t be able to leave your home behind for your loved ones, the money from the sale of the home will be used to pay off your loan – and anything leftover will go to your estate.


Myth - I'll leave my family in debt

When you take out an equity release plan in the form of a lifetime mortgage, you’re fully protected by a “no negative equity” guarantee.

This is because although the amount released plus interest will be a debt against your home, the amount charged will never be greater than the value of your house. The debt will be repaid from the sale of your home on death or moving into long-term care.


Myth - I could lose my home and be forced to move out

When you choose a lifetime mortgage, you’ll still be the legal owner of your home. And when it comes to home reversions plans, 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.

Plus, if you want to guarantee an inheritance for your loved ones, you can do so. You’ll be able to ringfence some of the value of your home to leave as a legacy – just make sure you tell your adviser when you meet them for the first time.


Myth - I'll be stuck in this house for the rest of my life

As long as your property meets the criteria of your equity release provider, you may be able to move and take your plan with you.

You won’t have to pay a penalty, though there are certain costs. This will be explained to you fully before you take out equity release, and it’s always a good idea to discuss the prospect of moving home with your equity release provider before setting the wheels in motion.

couple in their kitchen talking

What's the catch with equity release?

Equity release has become more popular over recent years due to falling interest rates and improved regulation. However, like most financial products, it’ll cost you money. “The catch” is simply that you will pay interest on the money you release and the amount you owe will grow each year.

Because you’re borrowing against your home, the interest, plus the amount you release will need to be paid back to your equity release provider from the sale of your home when you die or move into permanent care.

Before releasing equity, it’s important to understand how much it could cost you. You can then make an informed decision if it is the right option you.

Once you understand the costs involved, you can then weigh up the pros and cons of using equity release to top-up your pension pot or whatever else you might need the money for.

What to consider when thinking about
releasing equity

To help you get started, here's a simple list of the top things you should think about when considering equity release.

  1. Your eligibility - do you meet the requirements?
  2. What you need the money for – are there any alternatives options?
  3. Type of plan – have you considered the different types of plans available?
  4. How much it will cost – have you compared interest rates?
  5. Your family – do they support your decision to release equity?
  6. Getting advice – have you got impartial advice?
  7. Taking your time – have you taken the time to consider your decision carefully?

Getting equity release advice

Getting advice is a necessity with equity release products. We can put you in touch with an adviser from our preferred partner, who can help you with all the answers you need.

It’s also important to talk things over with family and loved ones before making any big financial decisions. Taking out a lifetime mortgage is likely to affect them too by reducing their inheritance.

Loved ones are so important in these decisions that we’d encourage you to involve a family member in discussions with your adviser.

If you’d like to get advice call us today on 0800 633 5566. We’ll put you in touch with an expert adviser through SunLife’s Over 55 Equity Release Service, who’ll answer your questions before you take any next steps.

Questions to ask equity release advisors

Releasing equity from your home is a big financial decision. Talking things over with friends and family helps, but equity release advisers are the people who can best assess your options.

Here are some key questions to ask an advisor.

1. How much will I have to pay?

Finding out how much equity release could cost up front helps avoid any nasty surprises later and means you can compare rates for different equity release advisers. They should tell you about any set-up costs, arrangement fees and legal fees involved – as well as their own fees.


2. Are you a member of the Equity Release Council?

The Equity Release Council provides guidelines for advisers, designed to protect customers like you. The Council only accepts fully qualified equity release advisers, so membership means you’re getting advice you can trust.

Because the equity release providers you’ll be able to pick from through SunLife’s Over 55 Equity Release service are Council members, you’ll also get a ‘no negative equity guarantee’ with any lifetime mortgage, meaning you’ll never owe more than the value of your home.


3. What are the potential pitfalls of equity release?

Qualified equity release advisers will be able to clearly explain not just the advantages, but also the potential pitfalls of an equity release plan – like the potential impact on your entitlement to state benefits, or how equity release will reduce the value of your estate.


4. Can you advise on all types of equity release?

There are two main kinds of equity release plan – lifetime mortgages and home reversion plans. Equity release products are evolving and innovating all the time, so you want an equity release adviser who knows their stuff and can advise you on all your options.


5.What does your advice process look like?

You want to discuss all your options and feel no obligation to proceed. Based on a (usually free) initial consultation, good equity release advisers will come back to you with their findings and personalised recommendations, to help you make a fully informed decision.

Our advice process always begins with a free consultation with an equity release adviser. Call 0800 633 5566 today or request a call back to start the ball rolling.


6. What if equity release isn't for me?

FCA-regulated equity release advisers are trained to discuss every option with you, which includes not going with equity release if they don’t feel it’s the right way to go. Be sure to discuss alternatives with your adviser, which might mean delaying equity release for a while until it works better for your circumstances.


7. What makes you the right equity release advisor for me?

You want an adviser with expert knowledge and experience of dealing with people in your situation. You need confidence they’re working with your best interests in mind and will be on hand to offer helpful advice at every step of your equity release journey.


Next steps

If you’re ready to speak to someone about equity, you can start the advice process by having a free consultation with an advisor from the SunLife equity release service.

Otherwise, if you want to read-up and find out more about equity release, here’s some of our other useful articles.

Want to talk to somebody about Equity Release?

Call our UK helpline FREE on 0800 633 5566 or request a call back

Here's the information that you need to know about who we are and the other companies that we work with in order to provide our products and services.

Who are SunLife and who provides the SunLife Guaranteed Over 50 Plans?

SunLife Limited distributes financial products and services , registered office: 1 Wythall Green Way, Wythall, Birmingham, B47 6WG, United Kingdom (registered in England and Wales, no. 05460862). SunLife Limited is authorised and regulated by the Financial Conduct Authority and is entered on the Financial Services Register (registration no. 769427).

Phoenix Life Limited trades as SunLife and is the provider of the SunLife Guaranteed Over 50 Plan life insurance policies. Phoenix Life Limited’s registered office is at 1 Wythall Green Way, Wythall, Birmingham, B47 6WG, United Kingdom (registered in England and Wales, no. 1016269).

Who provides the Funeral Benefit Option?

If you choose to add Funeral Benefit Option to your Guaranteed Over 50 Plan, Dignity Funerals Ltd arranges and provides the funeral services, registered office: 4 King Edwards Court, Sutton Coldfield, West Midlands, B73 6AP (registered in England and Wales, No. 00041598). Dignity Funerals Ltd is a member of the National Association of Funeral Directors.

Who provides the Funeral Plans?

Dignity Funerals Ltd arranges and provides the funeral services, registered office: 4 King Edwards Court, Sutton Coldfield, West Midlands, B73 6AP (registered in England and Wales, No. 00041598). Dignity Funerals is not authorised or regulated for this activity by either the Financial Conduct Authority or the Prudential Regulation Authority. Dignity Funerals Ltd is a member of the National Association of Funeral Directors.

The life insurance policy that pays for your funeral will be provided by Phoenix Life Limited, trading as SunLife.

Who provides SunLife Pet Insurance

SunLife Pet Insurance is arranged and administered by BDML Connect Limited. BDML Connect Limited is authorised and regulated by the Financial Conduct Authority (No. 309140). Registered in England and Wales Number 02785540. Registered Office: 45 Westerham Road, Bessels Green, Sevenoaks, Kent, TN13 2QB.

Who provides SunLife Home Insurance

SunLife Home Insurance is arranged and administered by BISL Limited and underwritten by a panel of insurers. BISL Limited are an intermediary authorised and regulated by the Financial Conduct Authority. Registered in England no. 03231094. Registered office Pegasus House, Bakewell Road, Orton Southgate, Peterborough PE2 6YS.

Who provides SunLife Car Insurance

SunLife Car Insurance is arranged and administered by BISL Limited and underwritten by a panel of insurers. BISL Limited are an intermediary authorised and regulated by the Financial Conduct Authority. Registered in England no. 03231094. Registered office Pegasus House, Bakewell Road, Orton Southgate, Peterborough PE2 6YS.