Equity release is an increasingly popular option for homeowners looking to unlock the value of their property, typically in retirement.

Despite its growing use, there are still many misconceptions and myths surrounding the concept.

We’ll explore the top 12 myths about equity release, clarify the facts, and help you make an informed decision if you're considering this financial solution.

What Is Equity Release?

Equity release allows homeowners, typically over the age of 55, to access the equity (value) tied up in their property.

This can be done either through a lifetime mortgage or a home reversion plan.

The most common form of equity release is a lifetime mortgage, where you borrow money against your home while still living in it.

The loan, plus interest, is repaid when you move out or pass away.

Myth #1: You Will Lose Ownership of Your Home

One of the most common myths is that by releasing equity, you lose ownership of your home. T

his is not true.

With a lifetime mortgage, you remain the owner of the property.

The loan is only repaid when you move out, sell the property, or pass away.

Myth #2: You Must Make Monthly Repayments

Another prevalent myth is that you must make monthly repayments on the loan.

In reality, most equity release plans, such as lifetime mortgages, do not require monthly repayments.

Instead, the loan amount and interest accumulate and are repaid when the property is sold.

Myth #3: Equity Release Is Only for People with Financial Problems

Equity release is often thought of as a last-resort option for those in financial hardship. However, this is a misconception.

Many people use equity release to supplement their retirement income, fund home improvements, or enjoy a better quality of life without having to move.

Myth #4: You Will Have Nothing Left to Leave to Your Heirs

Many people worry that equity release will eat up the value of their property, leaving nothing to pass on to their heirs.

While it is true that the loan will need to be repaid from the sale of the property, any remaining value after repaying the loan is passed on to your beneficiaries.

It is also worth noting that with certain plans, you can protect a portion of your home’s value to ensure your heirs inherit something.

Myth #5: Equity Release Is Too Expensive

Some people believe that the costs of equity release are too high, especially with interest rates involved.

However, equity release plans can be tailored to meet individual circumstances, and the interest rates may be lower than some other borrowing options.

It is important to compare options and shop around to find the best deal.

Myth #6: You Can't Move to a New Property

A common myth is that once you release equity, you are stuck in your home. This is not the case.

With most lifetime mortgage plans, you can move to a new property, provided that it meets the lender’s criteria.

The loan will be repaid when you sell the property, and any remaining equity will be available for you to use on the new property.

Myth #7: You Can't Take Out More Equity in the Future

Some people think that once they've released equity, they can’t access additional funds later.

However, many plans allow you to take out more equity later on, either as a lump sum or in smaller, regular amounts.

This can provide flexibility in case of future needs.

Myth #8: Equity Release Plans Are Only for Single Homeowners

It’s a common misconception that equity release is only available to single homeowners.

In reality, both single and joint homeowners can apply for equity release, provided they meet the eligibility criteria.

For joint homeowners, both individuals must typically be over the age of 55.

Myth #9: The Government Will Take Your Home

Another myth is that if you release equity, the government will take your home.

This is untrue. Equity release is a private financial arrangement with a lender, and the government has no claim to your property unless you are receiving specific government benefits that are tied to homeownership.

Myth #10: Your Family Will Be Forced to Sell Your Home

Some people worry that if they use equity release, their family will be forced to sell the home when they pass away.

While it is true that the loan must be repaid upon your death or when you move into long-term care, the sale of the property is typically managed by your estate.

The lender is repaid, and any remaining equity will go to your heirs.

Myth #11: Equity Release Is the Same as a Reverse Mortgage

While both equity release and reverse mortgages allow you to borrow against your property, they are not the same.

A reverse mortgage is more common in other countries like the United States and may come with different conditions.

In the UK, lifetime mortgages and home reversion plans are the main types of equity release.

Myth #12: Equity Release Plans Are the Same for Everyone

Another myth is that all equity release plans are the same.

In reality, equity release schemes can vary greatly depending on your lender, the type of plan you choose, and your individual circumstances.

It’s important to work with a specialist to find a plan that suits your needs and goals.

Common Questions

Conclusion

Equity release offers a flexible way for homeowners to access the value of their property, but there are many myths surrounding it.

By understanding the facts, you can make an informed decision and choose a solution that fits your needs.

Whether you’re looking to enhance your retirement, fund home improvements, or simply enjoy more financial freedom, equity release can be a useful tool when approached with the right knowledge.

Always seek professional advice to ensure that the plan you choose is suitable for your personal circumstances.