Did you know that an equity release plan is taken out every 15 minutes in the UK? If you find yourself with equity in your home but limited cash for retirement, equity release could be a way to generate the income you need. That’s because it lets you unlock the value tied up in your home as a tax-free lump sum or a regular income – so you don’t have to downsize to get hold of the money.
If you still have a mortgage, the money you release will pay this off first. Then, any remaining cash is yours to spend as you wish – whether you want to make everyday life more comfortable, improve your home, or lend your family a hand. There are no monthly repayments to worry about either – instead the loan and rolled up interest are paid back when your home is sold, which is usually when you pass away or move into permanent care. You can read more in our equity release guide.
Even though equity release is booming, there are still some common myths around, which leaves some people asking: how safe is equity release? Well, we’re here to talk about some of the concerns you might have to help you make up your own mind.
Here are 5 reasons why a lifetime mortgage (the most popular type of plan) is considered to be safer than in the past...
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
1. It’s fully regulated
Unlike unregulated equity release plans of the past, today’s equity release market is regulated by the Financial Conduct Authority (FCA). This should give you valuable reassurance.
For extra peace of mind, there’s also a dedicated industry trade body: the Equity Release Council (ERC). It represents providers, qualified advisers, intermediaries and surveyors who work in the sector – and all members have to adhere to the Council's Statement of Principles, which are there to provide important safeguards for you.
Because our preferred partner, Age Partnership, are members of the ERC, you know you’ll be protected every step of the way. You’ll find out more about their rules and protections as you read through this article.
2. You’ll never leave your family in debt
With a lifetime mortgage approved by the ERC, the ‘no negative equity guarantee’ is also there to protect you. No risk of negative equity means you’ll never owe more than the value of your own home – and you could never saddle your family with any debt. So if that was something you were concerned about, there’s no need to worry.
Even if your property was to decrease in value significantly, and selling it wasn’t enough to repay your plan in full, any remaining debt would just be written off when you pass away or move into long term care. That’s another load off your mind.
3. You still own your own home
Perhaps you thought that equity release means you’ll no longer own your own home. But with a lifetime mortgage, that simply isn’t the case. You won’t have to sell any part of your home in order to access the money you need – you’ll just be borrowing against the equity, because a lifetime mortgage is a debt secured against it. As such, you can continue to live and own your own home. It’s as simple as that.
According to the ERC rules, when you take out equity against your home, if both you and your partner are on the contract, you are guaranteed to remain the sole owners until you both pass away, or you both go into permanent care. It means you’ll have the right to live there as long as you want – and you can rest easy knowing you’ll never be forced to move.
4. You’re free to move house
Taking out an equity release plan doesn’t necessarily mean you’ll be tied to your current property forever (unless you want to be, of course). If your circumstances change, you should have the flexibility to move house if you need to.
The ERC gives you the right to take your equity release plan with you, as long as you’re moving to a ‘suitable alternative property’ – meaning somewhere that meets the lending criteria of your equity release provider. It’s worth bearing in mind that if you were to move to a less expensive place, you may have to repay some of the amount you owe.
5. You can still leave an inheritance
Because equity release loans (and the interest) are repaid when your home is sold, it does mean you won’t be able to leave your home as an inheritance. But if there’s anything left over after everything’s been paid off, it can go to your estate (as per your will).
If you want to absolutely guarantee an inheritance for your loved ones, there’s a way to do it. When you set up your equity release plan, you can choose to ringfence some of the value of your home. Just make sure you let your adviser know, so they can find an equity release plan that meets your needs.
Don’t forget – some people even use equity release to give an early inheritance. Whether your children need a mortgage deposit or you’d love to lend a hand with their wedding, you could see them enjoy their money during your lifetime. Of course, you should always consider your own financial position and seek advice before giving money away.
Is equity release a good idea?
You can rest assured that you’re in good hands with a trusted equity release partner. And the SunLife Over 55 Equity Release Service is here to help you get what you need.
As for whether equity release is the right thing for you, that depends entirely on your circumstances. If you’re a homeowner aged 55 or over, you could be eligible for equity release. And if you’re asset rich but cash poor, it could be a great way to boost your income in later life.
That said, it’s important to consider other avenues first, including using your savings and downsizing to a smaller, cheaper property. It’s also worth bearing in mind that equity release may reduce the inheritance you leave, and it can affect your eligibility for state benefits.
Get the advice you need
Before making any final decisions, it’s important to make sure you understand what’s involved and whether equity release is right for you.
With this in mind, you should always seek professional advice from an independent expert adviser, who’ll talk you through the details, and you can ask as many questions as you wish. When you’re ready, The SunLife Over 55 Equity Release Service is here to help you on your way.