Have you heard conflicting stories about equity release and wondered which are facts and which are just equity release myths?

With equity release borrowing doubling between 2017 and 2022, it’s no surprise that misconceptions have surfaced, making this financial product seem more confusing than it needs to be.¹

In this article, the EveryInvestor team is here to debunk the 12 most common myths surrounding equity release, providing you with clear and accurate information; by separating fact from fiction, you'll be empowered to make informed decisions and understand how safe equity release is.

Let’s discover the truth behind these myths and set the record straight...

What Is Equity Release?

Equity release allows individuals over 55 to unlock the value of their home without needing to sell it, providing additional cash to support financial needs in retirement.

This can be done through:

• A lifetime mortgage, where homeowners take a loan against their home’s value, repaid when the property is sold.
• A home reversion plan, where homeowners sell part or all of their property while retaining the right to live in it, with the proceeds repaid from the eventual sale.

Both options allow retirees to remain in their homes while accessing the equity built up over time.

The 12 Biggest Myths About Equity Release Explained

The 12 most common myths about equity release include losing ownership of your home, leaving nothing for inheritance, facing unmanageable debt, or being forced to move.

These myths can cause unnecessary confusion and deter people from exploring this viable option when, in reality, protections set in place and flexible options dispel these misconceptions.

Let's debunk 12 of these common myths:

Myth #1: I Will Owe More Than My Home Is Worth With Equity Release

No, you will not owe more than your home is worth; thanks to the No Negative Equity Guarantee, offered by lenders who are members of the Equity Release Council (ERC), you are protected from falling into negative equity, even in the event of market fluctuations.²

This guarantee ensures that, regardless of how much interest accrues or how your property’s value changes, you will never owe more than the home’s sale value when the loan is repaid.

If the sale of your home doesn’t cover the outstanding balance, your lender will write off the shortfall, ensuring peace of mind for both you and your beneficiaries.

Learn More: Equity Release Council Code of Conduct

Myth #2: Equity Release Isn't Properly Regulated and Safe in 2025

Equity release is highly regulated and safe, thanks to oversight by the ERC and the UK's Financial Conduct Authority (FCA) which ensure that equity release providers adhere to strict standards that protect consumers.

As part of the ERC's code of conduct, members are required to:

• Provide a No Negative Equity Guarantee in all lifetime mortgage plans, ensuring borrowers never owe more than their home's value.
• Offer fixed or capped variable interest rates on lifetime mortgages, ensuring transparency and control over costs.
• Allow borrowers to make penalty-free repayments up to a specified percentage.³
• Permit homeowners to move house and transfer their equity release loan, provided the new property meets the provider’s criteria.
• Guarantee borrowers the right to live in their home for life or until they move into long-term care.⁴

These regulations ensure that equity release is a safe and viable option for homeowners, with strong protections in place.

Myth #3: I Have a Mortgage, so I Can Not Take Out Equity Release

You can take out equity release even if you still have a mortgage on your property; in fact, using equity release to repay an existing mortgage is a common practice.

One key benefit of this approach is that equity release loans do not require you to make monthly repayments during your lifetime unless you choose to do so.

By using the funds from equity release to settle your mortgage, you can become mortgage-free and eliminate the burden of monthly payments, allowing for greater financial flexibility in retirement.

Myth #4: Equity Release Is Always an Expensive Way to Borrow

Equity release is no longer always an expensive borrowing option, thanks to new products and repayment safeguards introduced by the ERC in March 2022.

Previously, interest would compound significantly over time, but now many equity release plans allow for penalty-free repayments, helping reduce the principal debt and making the process more affordable.

But, is there an alternative?

Yes; you could consider a Retirement Interest-Only (RIO) mortgage, which allows you to pay off the interest during your lifetime, leaving only the principal to be repaid when the property is sold and potentially reducing the overall cost of borrowing.

Myth #5: I Will Not Be Able to Leave My Loved Ones an Inheritance If I Take Out Equity Release

You can still leave an inheritance for your loved ones if you take out equity release, especially considering many modern equity release loans now offer inheritance protection—a feature that allows you to safeguard a percentage of your property's value for your heirs.

For example, you could release 50% of the equity for yourself while protecting the remaining 50% to pass on to your loved ones.

Is that the only way to pass something on?

No; equity release can also be used to provide a living inheritance and allows you to see your loved ones benefit from your support during your lifetime.

Instead of waiting until after your passing, you could release equity now and gift it to your family, helping with things like a house deposit, university fees, or other major expenses.⁵

Myth #6: My Home Will No Longer Belong to Me If I Take Out Equity Release

With most equity release plans like lifetime mortgages, your home will still belong to you and you'll retain full ownership; this is one of the key benefits of opting for this type of equity release.

Take note—If you choose a home reversion plan, you will cede a portion of your home’s ownership to the lender in exchange for a cash sum; however, you still maintain the right to live in your home until you pass away or move into permanent care.

Myth #7: I Will Be Required to Make Monthly Payments

With any kind of equity release, you will not be required to make monthly payments, as both the capital and interest on equity release are typically repaid only when the property is sold after you pass away or move into long-term care.

You can, however, choose to make payments during your lifetime to manage compound interest or reduce the loan balance.

If you take out a new lifetime mortgage that adheres to the ERC's latest standards, you can make interest payments or repay part of the principal without incurring Early Repayment Charges.

Myth #8: I Can Only Take Equity Release as a Lump Sum

No, you no longer have to take equity release as a lump sum; modern plans offer much more flexibility, with options like the Drawdown Lifetime Mortgage, which allows you to access your funds gradually rather than in a single payment.

Instead of taking the loan as a one-time lump sum, a drawdown facility gives you the freedom to access your loan reserve in smaller instalments as needed.

The best part? Interest will only accrue on the amount you withdraw, not on the total available reserve, making it a cost-effective way to manage your funds and control the growth of interest over time.

Myth #9: I Could Be Evicted From My Home If I Take Out Equity Release

You cannot be evicted from your home if you take out equity release, as all plans offered by ERC members guarantee you the right to live in your home for life.

If you and your partner have taken out a joint plan, this right extends until the last surviving partner either passes away or moves into permanent care, ensuring you can remain in your home as long as possible.

Myth #10: Releasing Money From My Home Is a Last Resort

Releasing money from your home through equity release is not necessarily a last resort; it can actually be a valid financial strategy to consider in retirement and help make day-to-day living more comfortable.

Rather than waiting until all other options are exhausted, equity release can be part of a proactive financial plan to improve your quality of life in retirement.

Myth #11: My Partner Will Have to Move Out If I Pass Away First

Your partner will not need to move out if you pass away first—provided you have a joint lifetime mortgage; as mentioned in Myth #9, a joint equity release plan remains in place until the last surviving partner either passes away or moves into permanent care.

However, if the plan is only in your name, the situation may differ. In this case, your partner needs to seek independent legal advice to explore their options.

If your partner is a beneficiary of your estate and wishes to remain in the home, the executor could consider repaying the loan using other assets to allow them to stay.

Myth #12: Equity Release Is Not a Safe Form of Borrowing

Equity release is now a safe and regulated form of borrowing, thanks to oversight by the ERC and FCA in the UK.

To benefit from these protections, it's important to choose a plan from a lender who is a member of the ERC, as this guarantees safeguards and consumer protections.

14 Important Facts About Equity Release You Need to Know

Understanding these 14 important facts about equity release is essential before making decisions; these include eligibility, interest rates, potential impact on inheritance, and fees.

Here are the key details:

#1. How Can You Pay Back the Interest on Your Equity Release Loan?

With equity release, particularly a drawdown lifetime mortgage, you have the option to access funds in smaller, multiple withdrawals rather than taking a large lump sum all at once, minimising the interest accrued.

To pay back the interest, some homeowners choose to make voluntary payments, reducing the overall cost of the loan, as it prevents interest from compounding over time; alternatively, many equity release plans defer interest payments, with the accumulated interest repaid when the loan is settled.

#2. Can You Make Voluntary Interest Payments with Equity Release?

Yes, you can make voluntary interest payments with equity release to prevent the interest on your loan from accumulating over time.

While there is no obligation to make regular payments, you can choose to repay the monthly interest as and when you wish, giving you flexibility and more control over managing the loan.

#3. Do You Have the Right to Stay in Your Home?

Yes; according to guidelines from the Equity Release Council, you do have the right to stay in your home for the rest of your life or until you move into long-term care, provided you adhere to the terms of your equity release plan.

This guarantee ensures that you will not be forced to leave your property as long as you continue to meet the agreed conditions, such as maintaining the home and keeping up with any insurance requirements.

#4. Can You Be Eligible for Equity Release Without Owning Your Home Outright?

You do not need to own your home outright to be eligible for equity release; if you have a small mortgage remaining, you can still apply for equity release, but any outstanding mortgage balance must be paid off using the funds you unlock through the equity release plan.

This ensures that the equity release lender has full security over the property.

Once the remaining mortgage is settled, you’ll have access to the remaining cash, which can be used for your financial needs.

#5. Is Equity Release Regulated by a Governing Body in 2025?

Yes, in 2025, equity release is regulated by a governing body referred to as the Equity Release Council, which establishes strict guidelines to protect consumers.

The Council ensures that providers follow ethical standards and offers guarantees, such as the right to remain in your home and a no-negative-equity guarantee, making it crucial to choose a lender that is ERC-accredited.

#6. How Does a Lifetime Mortgage Affect Homeownership in Equity Release?

A lifetime mortgage affects homeownership in equity release by allowing you to remain the owner of your property while borrowing against its value.

With a lifetime mortgage, you retain 100% ownership of your home, allowing you to continue living in it for the rest of your life or until you move into long-term care.

A lifetime mortgage offers the benefits of security, stability, and comfort, as you maintain ownership of an appreciating asset while accessing the equity tied up in your property.

#7. Will You Ever Owe More Than Your Property's Value with Equity Release?

No, you will never owe more than your property's value with equity release, as the ERC's No Negative Equity guarantee ensures this. Even if the property market declines, and the sale of your home doesn't cover the full amount owed, any excess debt is written off.

This guarantee protects your heirs from being burdened with any outstanding equity release debt when you pass away or move into long-term care.

#8. How Do You Unlock Tax-Free Cash with Equity Release?

The cash you unlock through equity release is already tax-free, meaning you won’t need to pay income tax or capital gains tax on the amount received.

Additionally, equity release can be a strategic tool to reduce potential inheritance tax liabilities, as it allows you to access and use the equity in your home during your lifetime, potentially lowering the value of your estate.¹

#9. What Is the Minimum Age for Equity Release Eligibility?

The minimum age to qualify for equity release is typically 55 years old, though this can vary depending on the lender, as some offer products with a higher minimum age requirement.

While there is no strict upper age limit for certain equity release products, some plans may cap eligibility between 80 and 95 years old, depending on the terms of the provider.

#10. What’s the Minimum Property Value for Equity Release Eligibility in 2025?

To qualify for equity release, the property value required typically needs to be at a minimum of £70,000; however, in some cases, lenders may offer equity release options for up to 65% of your property’s value, depending on your specific circumstances and the lender's criteria.

#11. Equity Release Property Types: What Qualifies and What Doesn’t?

Not all property types qualify for equity release, and certain features may limit eligibility.

Most lenders require that the property is in good condition and has a marketable value.

Specific features, such as flat roofs or properties in certain locations, may be assessed differently by providers, so it’s crucial to check if your property qualifies.

If your home has unique characteristics, you may face higher interest rates or need additional assessments.

Properties with certain structural features or shared ownership might also affect eligibility.

Speaking with a specialist equity release adviser can help you identify whether your property meets the standard criteria and understand any potential limitations.

#12. How Do Health and Lifestyle Impact Your Equity Release Options?

Health and lifestyle can significantly impact your equity release options, as providers may offer enhanced plans with better terms or higher loan amounts based on certain health conditions or lifestyle factors.

With an enhanced lifetime mortgage, lenders take into account your health and lifestyle factors to potentially offer you better terms; if you have certain conditions or habits—such as smoking or a history of illness—you may be able to access more equity or benefit from lower interest rates.

#13. Can Equity Release Interest Rates Be Fixed for Life?

Yes, equity release interest rates can be fixed for life; the majority of equity release plans offer this, providing certainty about your long-term financial obligations.

However, some plans may feature variable interest rates, which are capped to protect you from significant fluctuations.

*While we regularly review interest rates, these may have changed since our last update.

Learn More: Fixed Equity Rates

#14. Will the Equity Release Debt Be Passed On to My Heirs?

No, your equity release debt will not be passed on to your heirs, as when you die or move into long-term care, the loan, along with any accrued interest, will be repaid through the sale of your property.

If the property value is not enough to cover the debt, the no-negative equity guarantee ensures that your heirs will not be responsible for paying the remaining balance, safeguarding your estate from any residual equity release debt for your family to settle.

#15. How Can a Solicitor Help With the Legal Aspects of Equity Release?

A solicitor can help with the legal aspect of equity release and play a crucial role in guiding you through the legal aspects of the process.

Once you’ve chosen the right provider and plan, your solicitor will handle the transfer of funds and the required legal paperwork, ensuring that all documents comply with regulations and that your rights are protected.

Under current laws, including post-COVID guidelines, you are required to have at least one face-to-face meeting with your solicitor to fully understand the terms and implications of your equity release plan before proceeding.²

Why Should You Seek Specialist Advice Before Choosing Equity Release?

It's important to seek independent equity release advice to ensure that you are making an informed decision based on your financial goals, and while this article has dispelled common myths, it is not exhaustive, and there may be other important considerations.

Key reasons to obtain independent advice include:

• Comprehensive market search: An independent adviser can access the entire market to find the most suitable plan for your needs.
• Wider knowledge: Advisers have expertise in a variety of plans and interest rates, offering you more options.
• Exclusive access: Some equity release lenders only work through independent specialists.
• Impartial guidance: An independent adviser will walk you through the pros and cons of each plan and let you know if a plan isn’t the right fit for you.

Always seek professional financial advice before committing to an equity release plan to fully understand its implications and terms.

Common Questions

In Conclusion

Now that we've dispelled the most common equity release myths, you should feel more confident about exploring this financial option.

Remember, the key to making informed decisions is seeking advice from a trusted expert.

With the right guidance, you can move forward knowing you're well-prepared to make the best choice for your financial future.