The equity release products of the past have left many people with preconceptions about how they work. While there is an element of risk with all financial products, modern equity release products are vastly different to those of the past and come with a variety of safeguards to help protect those who use them.
To help you understand more, we have created this handy myth buster, tackling some of the most common preconceptions including whether you have to sell your home, whether you could owe more than your home is worth, and more. What are the main equity release myths?
What is equity release?
Equity release works by allowing homeowners to access some of their home’s value, tax-free. You could release equity from your home if you:
- Are aged 55 or over
- Own your own home worth at least £70,000
- Want to release at least £10,000
- Are able to clear any existing mortgage on the property, either using the equity released or any additional funds. Clearing an existing mortgage is one of the most common reasons to release equity
Equity release could be the right choice for you if you want some funds in your later life to fulfil some long-held dreams, renovate your home, or achieve whatever retirement plans you have.
To help you learn more, Royal London have partnered with later life lending specialists Responsible Life to provide our Later Life Lending Service. They can discuss all of the options that are available to you, including the different types of later life lending products.
If I release equity, don’t I have to sell my home?
Although this is a worry for many, it is not true. With most equity release products, you do not sell your home, but rather borrow against it. Repayment is not due until the last applicant dies or moves into long-term care, at which point the home will usually be sold to achieve this.
Won't I owe more than my home is worth?
No, you won’t. We understand that this is one of the most common concerns when it comes to releasing equity, but in the modern market this couldn’t be further from the truth. For your peace of mind, Responsible Life will only recommend equity release products from lenders who are members of the Equity Release Council. As such, they will come with a no-negative equity guarantee, ensuring you can never owe more than the value of your home.
Isn’t equity release very risky?
While all financial products carry an element of risk, the industry body known as the Equity Release Council sets product standards to help mitigate these risks. The Council ensures that your lender will offer a variety of customer-focused safeguards, including:
- The option to fix your interest rate for life
- The guarantee that you will never owe more than your home is worth
- The guaranteed right to sell your home and move in the future, should you wish to do so (as long as the new property meets the lender’s criteria)
- The guarantee to maintain complete home ownership
- The right to live in your home for the rest of your life, or until you move into long-term care
All of these features are designed to protect you.
These types of product will not be suitable for everyone. Naturally, by taking equity out of your home today there will be less available to your estate in the future. If you are in receipt of means-tested benefits, your entitlement to them could be affected. This is why good advice is paramount, so that you can understand the features and risks involved with releasing equity. To provide you with expert advice, the Royal London Later Life Lending Service has chosen Responsible Life.
Your Responsible Life adviser can help you to understand more about the plans available that can help you mitigate some of the risks, and help you to understand which approach might be best for you.
Want to find out how much equity you can release from your home? Use the equity release calculator. You will also be sent a copy of the free guide to later life lending.
Can I release equity while I still have a mortgage?
Yes, you can release equity when you still have a mortgage, but the existing one must be paid off before you can use the money released for other purposes. What many people don’t realise is that one of the most popular reasons to release equity is to clear an existing mortgage.
Aren’t equity release interest rates really high?
No, in fact they are comparable to some interest rates on traditional mortgages. With interest rates at record lows, now could be a good time to consider your financial options. If you’re curious as to what interest rates could be available to you, Responsible Life’s friendly Information Team are just a phone call away on 0800 023 9311.
The information Team will not try to sell anything to you. They are there to answer any questions you might have and set up an appointment with an equity release adviser if you meet the initial criteria for equity release.
Can I move home in the future if I release equity?
Yes, you can. Equity release products have become increasingly flexible, meaning there will be different options available to you. You could move to a new home and take your mortgage with you, provided that it meets the lender’s criteria.
You can also sell your house and repay your released equity. In some cases, this can come with early repayment charges, but there are products available with fixed and defined charges, so you know exactly how much it would cost to repay from the beginning.
Does equity release stop me from leaving an inheritance?
No, it doesn’t. Many of the equity release products that might be available to you will offer the option to ring fence a portion of your home’s value. While this will reduce the amount available to you when releasing equity, it will guarantee an inheritance for your loved ones.
There are also options available allowing you to make optional payments, either to cover the interest or reduce the effect of interest build-up. This can also help you to ensure that there will be an inheritance for your loved ones.
Can I find out more about releasing equity today?
Royal London have chosen specialists Responsible Life to provide the Later Life Lending Service. They can offer you advice on a variety of later life products, including equity release. By phoning their Information Team today, you can have any further questions that you might have answered, as well as receive an estimate of the amount that you could release from your home. Any conversation you have with the Information Team is purely informational and comes with no obligation to proceed.
Why not give them a call on 0800 023 9311?
Got a question? The Responsible Life team are here to help
Free from UK landlines and mobiles
Mon to Fri: 9am-8pm. Sat: 9am-5pm.
Royal London have chosen Responsible Life to provide our customers with advice on Later Life Lending products. The Royal London Mutual Insurance Society Limited has a 30% shareholding in Responsible Life and Responsible Lending (Responsible Group) and are part of the same group under FCA disclosure rules.
Responsible Life Limited is authorised and regulated by the Financial Conduct Authority and is entered on the Financial Services Register (https://register.fca.org.uk/) under reference 610205.
If you choose a mortgage with required repayments during your lifetime then your home may be repossessed if you do not keep up with the payments. A Lifetime Mortgage will impact the value of your estate and could affect your entitlement to means-tested benefits. Think carefully before securing other debts against your home.
To understand the features and risks, ask for a Personalised Illustration. Responsible Life’s adviser will talk through the setting up costs of a mortgage before you make any decision to proceed. Only if you choose to proceed and your case completes will Responsible Life charge an advice fee, currently not exceeding £1,690.
If you take out a product recommended by Responsible Life, Royal London Marketing Limited will receive a fee, for this introduction. If you would like further details about this fee, Responsible Life will be able to provide you with this. More information about Responsible Life and how your information is processed is available on their privacy notice. Find out how Royal London manages your personal data.
Royal London Marketing Limited is authorised and regulated by the Financial Conduct Authority, registration number 302391. Registered in England and Wales number 4414137.
Responsible Life's registered office is: Mills Bakery, Royal William Yard, Plymouth, PL1 3GE. Registered in England & Wales. Company number 7162252.