Busting those equity release myths

A lifetime mortgage is a long-term loan secured on your home which allows you to release some tax-free money from the value of your home after you turn 55. You’ll carry on living in your home, and still own every square inch. The loan and interest is usually repaid from the sale of your home once you (and your partner, for joint lifetime mortgages) pass away or need long term care, subject to terms and conditions. UK homeowners aged 55 and over Inheritance will be reduced. Your tax position and eligibility for welfare benefits may be affected. 

Now let's take a look at some of those myths in relation to our lifetime mortgage and explain the reality behind each one.

You’ll be leaving your loved ones with nothing

Its true they won't get as much in inheritance had you left your entire home to them in your will. The loan and interest can be repaid by any means, but this is normally by the sale of the home. As long as your home's sold for the best price it can reasonably get, anything that's left after the loan and interest have been paid will go to your loved ones.

When you apply for a lifetime mortgage, you can tell us if you want to safeguard a percentage of the sale price to go to your estate. This is known as an inheritance guarantee, this means you’ll still be able to leave some money behind for the people that are most important to you. Just bear in mind that it’ll reduce the overall amount you will unlock and inheritance will still be reduced. 

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. The minimum you can borrow is £15,000.

You’ll need to repay more than your home’s worth

That used to be a concern with older equity release products, but not anymore. Today’s lifetime mortgages from providers who are members of the Equity Release council come with a No Negative Equity Guarantee. This means that neither you nor your estate will ever have to repay more than the amount your home sells for, as long as it’s sold for the best price reasonably possible.

Here’s how it works:

• Negative equity happens when the amount you owe is more than the value of your property.
• With a lifetime mortgage, you do not have to make repayments, instead the loan is usually repaid when you (and your partner for joint cases) pass away or need long-term care, subject to terms and conditions. Interest builds up for as long as you have the mortgage and is charged on the total amount borrowed and the interest already added. This quickly increases the amount you owe.
• But thanks to the No Negative Equity Guarantee, you’re protected. Even if your loan ends up being more than your home is worth, we’ll never ask your family or estate to pay the difference.

It’s unsafe

That’s not true. We’re a long-standing member of the Equity Release Council, a trade body that helps represent people taking out equity release.

As one of the UK's most established and trusted equity release lenders, with over 25 years' experience, we've helped over 300,000 people release more than £11.9 billion.

You need to get financial and legal advice to be able to get a lifetime mortgage. This is required to ensure you're making an informed decision.

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 take it out together. With 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. Subject to our terms and conditions.

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 lending criteria at the time you apply to move.

If your new home doesn't meet our lending criteria, you won't be able to transfer your lifetime mortgage. This will mean you'll need to pay off the outstanding loan and interest in full – and you may also need to pay an early repayment charge. But if your property is eligible for downsizing protection, you won't need to pay the early repayment charge. This feature is only available on lifetime mortgages applied for on or after 8 April 2019 and you need to have held your plan for three or more years.

Releasing money from your home might be a solution/option to fund your needs

The reality is, equity release should be a consideration after looking at all alternative options. You might consider equity release for any number of different reasons. It could be that you 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. 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.

Although you might consider equity release for any number of reasons, it's important to look at other ways you might be able to fund your plans. You'll need to speak to a financial adviser before you can take out equity release and they will help you understand whether it's right for you. 

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.

Deciding whether to take our 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. It's important to consider the benefits costs and risks before deciding if a lifetime mortgage is right for you.

When you get in touch with us, we’ll ask a few eligibility questions before passing you to an equity release adviser. They’ll give you personalised advice on our lifetime mortgage only. 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.