7 equity release myths busted
Equity release can be a way of freeing up cash to help fund your retirement and fulfil your dreams. But many people may have misgivings about using the value in their home to provide them with more financial security. We separate the myths about lifetime mortgages from the facts.
Equity release can be a way of freeing up cash to help fund your retirement and fulfil your dreams. But many people may have misgivings about using the value in their home to provide them with more financial security. We separate the myths about lifetime mortgages from the facts.
Myth #1: If I take out an equity release mortgage, I won’t own my home any more.
Fact: With a lifetime mortgage you secure funds against your home, but you continue to own it – not the equity release provider. It’s yours to live in until the last person on the agreement dies or goes into long-term care. Your home remains yours, but the lender will require you to keep it in good condition.
Myth #2: I need to own 100% of my home to get an equity release mortgage.
Fact: This isn’t the case, but if you do have an outstanding mortgage and you opt for equity release, you’ll need to use the release money – or your savings – to pay off the mortgage. In fact, using equity release to pay off an outstanding mortgage is one of the things people often use lifetime mortgages for. That way, you don’t have to worry about monthly mortgage repayments.
See more on what you could do with your released equity.
Myth #3: I could end up owing more than my home is worth.
Fact: The worry about negative equity – owing more than your home is worth – is why it’s so important to find a lifetime mortgage from an Equity Release Council approved lender. These lifetime mortgages come with a no negative equity guarantee. So that means the balance is written off if your property is sold for less than the loan amount, meaning your beneficiaries won’t be left with interest to pay off.
Myth #4: I have to take equity release as a lump sum.
Fact: Depending on the type of lifetime mortgage you choose, you can get a one-off lump sum. But, if you prefer, you can find a lifetime mortgage that allows you to choose an amount to release, take a lump sum, then draw down the rest in stages. You can even make voluntary repayments if you choose a flexible lifetime mortgage.
Myth #5: If I take out a lifetime mortgage, I won’t have anything to leave my loved ones.
Fact: A lifetime mortgage may reduce the value of your estate. However, people sometimes use the money from lifetime mortgages to give their loved ones an early inheritance. There are also plans available that help you control the effect of equity release on your estate.
Myth #6: I’ll have to pay tax on any money I get from equity release.
Fact: This isn’t the case. The money you release with a lifetime mortgage is tax-free. Bear in mind, though, that it may affect your entitlement to means-tested state benefits.
Myth #7: I’ll still have to make monthly repayments with an equity release mortgage.
Fact: Having a lifetime mortgage frees you from monthly repayments. Interest on your mortgage accrues, but it doesn’t need to be paid until your property is sold. However, if you prefer, you can choose a plan that allows you to pay off up to 10% of the amount you borrowed every year.
Choosing an equity release mortgage
Compare the Market’s equity release partner Responsible Equity Release will provide you with a personalised illustration with the features of your plan and any risks. Find out more about equity release.
We’ve partnered with Responsible Equity Release to offer lifetime mortgages approved by the Equity Release Council.
Find out more
Alex Hasty - Insurance comparison and finance expert
At Compare the Market, Alex has had roles as Commercial Associate Director, Director of Trading and Director of Growth. He’s currently responsible for the development and execution of Comparethemarket’s longer-term strategic options, ensuring the right breadth of products and services that meet customer needs.