Equity release – it's all over our TV screens. You might have heard about 'releasing money from your home' on the radio too. But outside those 30-second snippets, what do you actually know about equity release?
There are a whole load of ifs and buts surrounding this product. So we’re here to help you separate the facts from the fiction – and bust those equity release myths you might have heard.
First things first – the type of equity release we offer is a lifetime mortgage, but what is that?
A little look at lifetime mortgages
It’s a long-term loan which allows you to release some money from the value of your home after age 55. And it’s usually repaid using your home’s value once you pass away or need long-term care.
The myths vs the reality
Now let’s debunk some of those myths and explain the reality behind each one.
You’ll need to repay more than your home’s worth.
The first myth for us to bust. Years ago, this may have been the case with some equity release products. But thanks to our no negative equity guarantee, neither your family nor your estate will need to pay back more than your home’s sold for, as long as it’s sold for the best price reasonably obtainable.
False. We’re a long-standing member of the Equity Release Council, a trade body that helps protect people taking out equity release.
We’re also one of the most established equity release lenders in the UK – having provided lifetime mortgages to over 250,000 homeowners since 1998.
And our lifetime mortgages are only available through regulated financial advisors who are qualified to sell this type of product – so you know you’re in good hands.
We’ll force you or your partner to move out when the other dies or goes into long-term care.
This isn’t the case. If you've taken out a joint lifetime mortgage, the loan will only need to be repaid to us when you've both passed away or need long-term care.
You can’t move.
Just because you’ve taken a lifetime mortgage, it certainly doesn’t mean you can’t move home. You may be able to transfer your loan to your new property – as long as it meets our eligibility criteria.
Depending on your reasons for moving and if you’re eligible, you may not need to pay an early repayment charge either.
You’ll be leaving your loved ones with nothing.
A common misconception around equity release. What actually happens is, as long as your home's sold for the best price reasonably obtainable, whatever’s left after the loan and interest have been paid will go to your loved ones.
It’s true that they may not get as much in inheritance had you left your entire home to them in your will. But when you apply for a lifetime mortgage, you can tell us if you want a percentage of the sale price to go to your estate. This is known as an inheritance guarantee.
It’s worth noting that if you choose to do this, you won’t be able to borrow as much. That’s because the loan is based on your home’s value without the percentage you’ve asked for as an inheritance guarantee.
Alternatively, you can choose to repay the loan and interest in another way. Although most people tend to pay it off from the sale of their home, it’s completely up to you.
Releasing money from your home is a last resort.
The reality – there are a number of reasons why you might be considering equity release. There may be a few things you want to do to spruce up your home. You may need a little help covering healthcare costs. Or you want to support loved ones who are trying to get on the property ladder themselves.
It could even be that you just want to make the most out of your retirement. You may have had to put more pennies away in your younger days to afford your home. And as property prices have risen considerably over the years, your home could be worth more than it once was. So you can now use that extra value in your home to top up your retirement fund.
With a lifetime mortgage, you can use your home to fund what’s important to you.
A better understanding means better decision making
Now we’ve quashed the rumours, you have a greater understanding of what choosing a lifetime mortgage actually means and its impact on you and your loved ones. And you can make a more educated decision about whether it’s right for you.
Before you decide
Deciding whether to take a lifetime mortgage is a big decision. It’s a good idea to speak to your family about your plans. It may affect them too, especially if it’ll impact their inheritance.
When you do contact us, we’ll ask a few eligibility questions before passing you to an independent financial adviser firm. They’ll give you personalised advice on our lifetime mortgage products. They’ll also consider other options which are open to you and whether equity release is right for you. If you decide to go ahead, you’ll also need to take legal advice.