Equity release myths busted

Equity release is one way for homeowners aged 55 or over to release tax-free cash from their home. In this guide, Royal London Equity Release Advisers explain how equity release works and clear up the myths, so you can decide if it's right for you.

Royal London has chosen to introduce its customers to the experts at Royal London Equity Release Advisers. They will provide advice on equity release products from across the whole market and will make a recommendation to you based on your personal circumstances. You will not receive advice or any recommendation from Royal London. The information on this page has been provided by Royal London Equity Release Advisers to help you understand more about releasing equity.

Will I still own my home?

If you release equity with a Lifetime Mortgage, you won’t have to sell your home or move out in your lifetime.

The Equity Release Council is the industry body for the UK equity release sector. They guarantee you the right to continue living in your home with all products that meet their standards.

The loan won’t need to be repaid until the last surviving homeowner dies or goes into long-term care. Once this happens, the loan will be paid back, usually when the home is sold.

Can I move home in the future if I release equity?

Yes. Equity release products are flexible, so you could move to a new home and take your mortgage with you, as long as it meets the lender’s criteria. You could also sell your home and repay the cash you unlocked with equity release, although you may need to pay early repayment charges.

Will I owe more money than my home is worth?

No. Equity release products from lenders who are part of the Equity Release Council will offer products that come with a 'no-negative equity' guarantee. This means you'll never owe more than the value of your home.

What are the uncertainties with equity release?

A lot of people may believe that equity release comes with uncertainties. While there are risks for you to consider, equity release can still be the right choice, and getting the right advice can help you to determine that. An equity release adviser from Royal London Equity Release Advisers will help you to consider that the value of your estate will be reduced and that your entitlement to means-tested benefits may be affected.

Additionally, the Equity Release Council, the industry trade body for equity release, has a list of product standards that its members must offer with all products.

These include:

• The option to fix your interest rate for life.
• The guarantee that you’ll never owe more than your home is worth.
• The right to move home in the future and bring your equity release product with you. The new property must meet the lender's criteria.
• The guarantee that you’ll still own your home and can live in it for the rest of your life, or until you move into long-term care.
• The right to make optional payments towards your Lifetime Mortgage.

Can I release equity while I still have a mortgage?

Yes. One of the most common reasons people decide to release equity is so they can pay off an existing mortgage. However, you'll need to pay your mortgage off first before you can use the money for anything else. As part of the process, your solicitor will receive the equity released and transfer your funds to clear your existing mortgage, all as a part of the same transaction.

If you're thinking about how much money you could release, try out Royal London Equity Release Advisers' equity release calculator today.

Are equity release interest rates really high?

Equity release interest rates can vary depending on your personal circumstances. As there's no standard interest rate, your adviser will search for an interest rate that is right for your circumstances.

As an example, as of August 2024, there are equity release interest rates available from around 5.5%.

Does equity release stop me from leaving an inheritance?

No. With equity release, you're only unlocking some of the value of your property, not all of it. When your house is sold after you've passed away or entered permanent long-term care, the amount you borrowed, plus interest, is usually paid back from your estate.

As you've released equity, the value of your estate will be reduced. However, it is possible to ensure that you still have an inheritance to leave for loved ones.

With some products, you can ring-fence a portion of your home's value as a guaranteed inheritance. This will reduce the pool of equity available to you. You might also choose to make voluntary payments to help cover all or some of the interest or reduce the amount that you owe. By doing this, you can aim to keep more of your home's value available to leave to your loved ones.

Do I need to get financial advice?

If you're thinking about releasing equity from your home, you'll need to speak to a qualified equity release adviser. There are different types of equity release products that will suit different people, and an adviser will be able to help talk through your options.

An adviser can also walk you through the risks, including that your estate will be reduced, and that your entitlement to means-tested benefits may be affected.

You can get expert advice on Lifetime Mortgages, Retirement Interest-Only Mortgages and traditional mortgages with the help of Royal London Equity Release Advisers. Use their online equity release calculator to find out how much you could release from your home with a Lifetime Mortgage.