Equity Release Facts

14 Facts About Equity Release in the UK That You MUST Know
Contributors: Nicola Date, Katherine Read. Edited by Rachel Wait & Reviewed by Francis Hui
We’re Laying Everything Out With These 14 Facts About Equity Release. Could These Retirement Products Be the Key to Your Dreams? Check These Out…
TABLE OF CONTENTS

Laying Out All The Equity Release Facts


Every year, an increasing number of homeowners over the age of 55 use equity release to access the wealth in their property inheritance. 

Entering into an equity release plan without proper expertise, on the other hand, might devastate your finances.

Knowing these equity release facts can help you avoid being taken in by fiction!

Luckily, we’ve got the latest inside scoop on equity release, and we’re here to present the truth. 

Through this article, you’ll learn:

  • Is equity release truly safe?
  • What guarantees do you have with equity release?
  • What happens to your property when you release equity?

We’ve delved into the topic, reviewed over 300 plans, and summarised everything you need to know about equity release before you make your final decision. 

Let’s get started!

Before You Start Reading….

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14 Facts About Equity Release You Must Know

If you’re considering releasing equity from your property, you must be aware of these 14 facts concerning equity release.

You Can Make Multiple Withdrawals With Equity Release

You may use equity release to make multiple withdrawals rather than simply one large lump payment if you choose.

This is known as a drawdown lifetime mortgage

You Can Pay Back the Interest on Your Loan

Instead of allowing the interest on your debt to accumulate, you may pay it back.

While there’s no obligation, you can volunteer to repay the monthly interest, stopping and starting whenever you wish.

You Have the Right to Stay In Your Home

According to the Equity Release Council1 guidelines, you have the right to remain in your house for the duration of your equity release plan.

You Don’t Have to Own Your Home Outright to Be Eligible for Equity Release.

You don’t have to own your house outright to be eligible for equity release.

Instead, you can have a small mortgage that is paid off with some of the cash you unlock. 

Equity Release in 2022 Is Regulated by a Governing Body

Equity release is regulated by a governing body called the Equity Release Council, which has strong laws to safeguard consumers.

Always select a lender that’s a member of the Council.

With a Lifetime Mortgage, You Retain 100% Of Homeownership.

You retain 100% ownership of your home with a lifetime mortgage, but you sell all or a portion with a home reversion scheme, yet still remain living there. 

A lifetime mortgage means you get to enjoy everything your home offers: security, stability, comfort, and the satisfaction of owning a precious asset that’s rising in value over time.

You’ll Never Be in Debt More Than the Value of Your Property.

The no negative equity guarantee2 ensures that you’ll never owe more than the value of your home.

The Equity Release Council has established this to ensure that your family isn’t left with equity release debt when you die or move into permanent care.

So basically, this guarantee assures that any excess amounts payable from your equity release will be wiped off if they exceed the market value of your home, even if property values fall.

The Cash Is Tax‑Free

The cash is tax-free with equity release, and you won’t have to pay any income tax or capital gains tax on the money you unlock. 

You can also use equity release to avoid inheritance tax3.

There’s a Minimum Age

The minimum age to release the equity from your home is 55 years old.

However, there’s no upper age limit for some products, yet some may have a cap for taking out a loan between 80 and 95.

There’s a Minimum Property Value in 2022

To release equity, your property must be valued at least £70,000 – although, in rare situations, you may still access up to 65% of the value of your estate.

Lenders May Take Your Health & Lifestyle Into Account

With an enhanced lifetime mortgage, lenders may consider your health and lifestyle, offering maximum equity and minimal interest rates. 

The Interest Rate Can Be Fixed for Life

The majority of equity release interest rates are fixed for the remainder of your life. 

However, some programs have variable interest rates that are capped.

The Debt Won’t Be Passed On

Your equity release debt won’t be passed on to your heirs. 

Instead, when you die or require long-term care, the loan and any compound interest are paid off, generally through the sale of your property.

A Solicitor of Your Choosing Will Aid with the Legal Aspects of Equity Release

You’ll be guided through the legal parts of the equity release process by a solicitor of your choosing. 

Once you’ve chosen the equity release right for you, an estate attorney will assist you with the transfer and legal paperwork.

The post-COVID laws dictate that you must have at least one face-to-face meeting with your solicitor.

Common Questions

How Long Does The Equity Release Process Take?

What Are The Pitfalls Of Equity Release?

Can I Be Refused Equity Release?

Conclusion

If you’re still questioning if equity release is a sensible decision in 2022 after considering these facts, The short answer is yes.

If done correctly, equity release may be a fantastic financial strategy to provide UK citizens over 55 with a stress-free retirement.

However, you’re obligated to get confirmation from a financial advisor before unlocking the wealth in your property.

How Much Can You Release?

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Value of Your Home?

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Editorial Note: This content has been independently collected by the EveryInvestor advisor team and is offered on a non-advised basis. EveryInvestor may earn a commission on sales made from partner links on this page, but that doesn’t affect our editors’ opinions or evaluations. Learn more about our editorial guidelines.