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5 common equity release myths

It isn’t unregulated, and you won’t saddle your family with debt – we set the record straight by debunking 5 equity release myths. 

Don’t believe everything you hear

Carrots don’t make you see in the dark. Vikings didn’t have horns on their helmets. And you can’t see the Great Wall of China from space.

We hate to break it to you, but that’s the thing about myths – they’re not true. And the same goes for common misconceptions around equity release, which are holding back some over 55s from considering the value tied up in their home without having to sell up and downsize.

Equity release has come a long way over the years – and more and more homeowners are choosing to release equity and take money from their biggest asset to boost their income in retirement, with either a lifetime mortgage or a home reversion plan. But even though times have changed, some people still confuse today’s plans with those that have received bad press in the past.

small handmade house sitting on bank notes

What’s caused all this confusion?

In the 1980s, there was a mini equity release boom in the UK, but unfortunately products offered were not as consumer focussed as they could have been and this resulted in bad experiences. Some products were poorly designed so a borrower could end up in negative equity (when the value of the property is less than the debts owed on it) and pass on debt liability to their estate.

Today, equity release is a far cry from the products of the ’80s, ’90s and early 2000s – it’s fully regulated and consumers are protected.

With this in mind, we’ve decided to set the record straight by busting five common equity release myths. There’s no denying that equity release isn’t the right route for everyone, but we think you should have some information you need to help you consider if it could work for you. So, let’s take a closer look.

tiny wooden house next to a pile of coins

Myth: “It’s unregulated”

Reality: Actually, you’ll find that since 2004, the equity release market is fully regulated. 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. There is significant consumer protection in place – whether you choose a lifetime mortgage or a home reversion plan.

For extra piece of mind, there is also an industry trade body, the Equity Release Council (ERC), that represents providers, qualified advisers, intermediaries and surveyors who work in the sector. Members must adhere to the Council's Statement of Principles, which puts in place safeguards for you.

fob watch and pen sitting on a last will and testament document

Myth: “I can’t leave an inheritance”

Reality: 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.

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. They’ll be able to find and tailor a suitable plan for you.

daughter and partner looking at mounting bills

Myth: “I’ll leave my family in debt”

Reality: When you take out an equity release plan in the form of a lifetime mortgage or home reversion scheme, you can rest easy knowing 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.

If there’s a downturn in the property market and your house was to fall in value (and the sale of your property wasn’t enough to repay the plan), any debt would be written off when the house is sold.

mature lady sitting on the floor looking at a picture frame

Myth: “I could lose my home and be forced to move out”

Reality: 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 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. ERC rules state that, when you take out equity against your home, you and your partner still jointly own the property and you both have the right to live there as long as you want.

row of newly built terraced houses

Myth: “I’ll be stuck in this house for the rest of my life”

Reality: Actually, this isn’t true with most plans – 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.

One thing to note is that the value of the property you are moving to must be enough that the equity release provider is happy to lend the same amount against it. If not, you may have to pay off some of the amount you’ve borrowed early.

Now you know a bit more

So, there you have it – we’ve demystified the myths that may have been stopping you from considering equity release. If you want to find out more about the ins and outs of what it could mean for you, why not read through our handy equity release guide today? And if you want to get your head around all the jargon, feel free to take a look at our A-Z of equity release and get to know all the terms.

Remember – releasing the equity in your home is a big decision, so it’s important to consider all of your options and weigh up the pros and cons before making any final decisions. You must seek professional advice, so you have a full understanding of what’s involved.

SunLife offers a range of straightforward and affordable products including over 50s life insurance, funeral plans, life insurance, equity release, pet insurance, home insurance, car insurance, ISAs and Will writing services

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? 

Phoenix Life Limited trades as SunLife and is the provider of the Guaranteed Over 50 Plan, SunLife Insurance and the life insurance policy payment option for Funeral Plans. Phoenix Life Limited’s registered office is at 1 Wythall Green Way, Wythall, Birmingham, B47 6WG (registered in England, no. 1016269). Phoenix Life Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority and is entered on the Financial Services Register (registration no. 110418). As part of SunLife’s commitment to quality service and security, telephone calls may be recorded.

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

You can contact us by post at SunLife, PO Box 1395, Peterborough, PE2 2TR or by phone on 0800 008 6060.

If you choose to add Funeral Benefit Option to your Guaranteed Over 50 Plan the funeral services are arranged and provided by Dignity Funerals Limited. Dignity Funerals Limited is a company registered in England and Wales No. 00041598. VAT registered No. 486 6081 14. 4 King Edwards Court, King Edwards Square, Sutton Coldfield, West Midlands, B73 6AP. Telephone No. 0121 354 1557. Fax No. 0121 355 808. Part of Dignity plc. A British Company. Dignity are not regulated by the Financial Conduct Authority or the Prudential Regulation Authority but are registered providers with the Funeral Planning Authority.

Who provides the Funeral Plans?

The funeral services are arranged by a funeral director selected by Golden Charter Ltd. Golden Charter Ltd are not required to be authorised or regulated by the Financial Conduct Authority or the Prudential Regulation Authority in relation to funeral plans but are registered providers with the Funeral Planning Authority.

If you choose to pay for your funeral in one go, with a single payment, you will have a contract with Golden Charter. The funeral services will be arranged by a funeral director selected by Golden Charter Ltd.

If you choose to pay for your funeral with a life insurance policy, the policy will be provided by Phoenix Life Limited, trading as SunLife. The funeral services will be arranged by a funeral director selected by Golden Charter Ltd.

Who provides My Smarter (ISA)?

My Smarter (ISA) is provided by Scottish Friendly Asset Managers Limited. Authorised and regulated by the Financial Conduct Authority. Details can be found on the Financial Services register, registration No. 188832. Member of The Investment Association. Registered Office: Scottish Friendly House, 16 Blythswood Square, Glasgow G2 4HJ.

Who provides the Will writing services?

Hugh James is authorised and regulated by the Solicitors Regulation Authority (SRA Number:303202).

The information contained on this website is based on Hugh James' understanding of the law of intestacy in England and Wales only as at April 2014. The law in Scotland and Northern Ireland is significantly different. This is for information purposes and is not intended to be legal advice.

Who provides Family Life Insurance?

SunLife Family Life Insurance is provided by Scottish Friendly Assurance Society Limited which is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Details can be found on the Financial Services register (registration number 110002). Registered Office: Scottish Friendly House, 16 Blythswood Square, Glasgow G2 4HJ. 

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.