Is Equity Release Safe? Separating Fact from Fiction in the Later Life Lending Market

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As people reach retirement age, many are looking for ways to boost their income and make the most of their assets. One option that’s increasingly popular is equity release, a process that enables homeowners to release some of the value of their property while still living in it. While equity release can be a good option for many people, there are still myths and misconceptions surrounding the process that can make some people hesitant to pursue it. In this article, we’ll take a closer look at equity release and answer the question: is it safe?

What is Equity Release?

Equity release is a financial product that enables homeowners to release some of the equity in their homes in exchange for tax free cash or regular income. There are two main types of equity release: Lifetime Mortgages and Home Reversion Plans. Although here at the Mortgage Mum we only advise on Lifetime Mortgages, we can refer your case on to a third party if a Home Reversion is required.

A Lifetime Mortgage is a loan secured against your home that you don’t have to repay until you die or move into long-term care. The amount you borrow, plus the interest that accrues, is repaid from the proceeds of the sale of your home when you die or move into care. Home Reversion Plans, on the other hand, involve selling a percentage of your home to a provider in exchange for a lump sum or regular income. You continue to live in your home, but the provider owns a share of it and will receive a share of the sale proceeds when you die or move into care.

Both types of equity release can be a good option for homeowners who want to access the value of their homes without having to sell them outright. However, there are still myths and misconceptions surrounding equity release that can make some people hesitant to pursue it.

Myths about Equity Release

One of the biggest myths about equity release is that it’s a risky and unreliable option that could leave you owing more money than your home is worth, however, the regulatory framework surrounding equity release has improved significantly in recent years, and there are now strict rules in place to protect consumers.

Another common myth about equity release is that it’s only for people who are struggling financially. While it’s true that equity release can be a good option for people who need to boost their income, it’s also a viable option for people who want to make the most of their assets and enjoy their retirement without worrying about financial constraints.

Why Equity Release is Safe

Despite the myths and misconceptions surrounding equity release, the reality is that it’s a safe and regulated option that can be a good choice for many homeowners. The Equity Release Council, the industry body that represents providers and advisers in the equity release sector, is committed to ensuring that consumers are protected and that equity release products are fair and transparent.

One of the ways in which the Equity Release Council safeguards consumers is by setting strict standards for providers and advisers. To be a member of the Equity Release Council, providers and advisers must adhere to a strict code of conduct that sets out best practices for the industry. This includes requirements for clear and transparent communication with consumers, as well as guidelines for assessing a consumer’s suitability for equity release.

The Equity Release Council also requires providers to offer a “no negative equity guarantee” on their products. This means that if the value of your home falls below the amount owed on your equity release loan, you or your estate will not be required to make up the difference. This provides peace of mind for consumers, as it ensures that they will never owe more than the value of their home.

In addition to these safeguards, the regulatory framework surrounding equity release has improved significantly in recent years. The Financial Conduct Authority (FCA), the UK’s financial regulator, oversees the equity release sector and has implemented strict rules to protect consumers.

Another myth surrounding equity release is that it may affect your ability to claim benefits or access local authority services. This is not entirely true. Cash released is not typically classed as income as it is a loan. However, any money kept as cash in savings could take you above the savings thresholds to receive the benefit.

If you are considering equity release, it is essential to work with an adviser who is registered with the Equity Release Council. This is because council members are required to adhere to a strict code of conduct that prioritizes the interests of the customer. They must also have passed relevant qualifications and have the necessary experience to offer advice on equity release.

Furthermore, the Equity Release Council also works with regulators and policymakers to ensure that the equity release market is appropriately regulated. This includes setting industry standards and guidelines, and working with government bodies to ensure that customers are protected.

In conclusion, equity release can be a viable option for homeowners aged 55 and over who wish to access the equity tied up in their property. While there are still some myths surrounding equity release, the market has improved significantly over recent years, with tighter regulation and more significant protections for customers. By working with an adviser who is registered with the Equity Release Council, you can be sure that your interests are being prioritized, and you are making an informed decision about your financial future.

Here at The Mortgage Mum, our Later Life Lending Advisers can also help you navigate the application process, ensuring you have all the information you need to make an informed decision. We understand that a Lifetime Mortgage is a big decision, and we’re here to support you every step of the way.

If you’re interested in learning more about a Lifetime Mortgage or Later Life Lending, get in touch with our Later Life Lending team today. We offer a free, no-obligation consultation, so you can speak to an adviser without any pressure or commitment. We’ll take the time to understand your needs and help you decide if a Lifetime Mortgage is right for you.

To get started, simply visit our Later Life Lending Enquiry page and fill out the form. One of our advisers will be in touch shortly to schedule a consultation at a time that suits you.

Remember, Equity Release is a big decision, and it’s essential to seek professional advice before proceeding. 

Find out more about Later Life Lending and contact our Later Life Lending team here.

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