Is Equity Release Safe?
With more than £4.8bn in property wealth being released in 2022, you’ve likely heard of these retirement products sweeping the UK nation.
But we bet you are wondering, is equity release safe? Fortunately, we have compiled some vital information to answer this burning question.
As experts in our field, we discuss the following in this article:
Our editorial team at EveryInvestor strives to bring you the latest market news.
Hence, we’ve done a detailed evaluation of current safety in the industry.
Here’s what we’ve found!
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Is Equity Release a Safe Way to Borrow?
Yes, equity release is a safe way to borrow, as long as you unlock cash through a member of the Equity Release Council1.
The Council has implemented a strict code of conduct that’s designed to protect the consumer.
Does Equity Release Offer Any Protection?
Yes, equity release does offer protection for its borrowers. This includes:
- The ‘no negative equity guarantee’ – ensuring you’ll never pay more on your loan than the final sale value of your property. Any additional equity release debt is written off by your lender.
- There’s zero risk of foreclosure – you’re granted permission to stay in your home until the last homeowner passes away or moves to a long-term care facility.
- Inheritance protection – you’re welcome to set aside a portion of your estate as a guaranteed inheritance that can’t be absorbed by the equity release loan.
- Fixed interest rates – your equity release interest rates will remain the same, no matter the state of the British economy.
- You’ll work with a financial adviser2 – who will guide you through the entire equity release process and help you determine if these products are the best move under your circumstances.
Are Equity Release Schemes Regulated?
Yes, equity release schemes are regulated by the Equity Release Council.
However, the Council only serves its members, so you may find some companies that don’t fall under these strict regulations.
We strongly advise you avoid unlocking equity through any companies that fail to hold an Equity Release Council membership.
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What Safeguards Are There for Equity Release Plans?
The safeguards for equity release plans include the Financial Conduct Authority, the Equity Release Council and the industry’s strict code of conduct.
Here’s more information:
Financial Conduct Authority (FCA)
The Financial Conduct Authority oversees and monitors the UK financial industry.
Thanks to the FCA3, consumers’ best interests are protected and equity release is especially safe nowadays.
The FCA also provides you with a way to take legal action against the providers who aren’t meeting the necessary requirements.
Equity Release Council (ERC)
The Equity Release Council (ERC) governs equity release specifically.
It requires its members to follow a strict code of conduct, and detailed rules and regulations. So, you can rest assured that your money and rights are protected.
The Equity Release Code of Conduct
Members of the Equity Release Council are required to adhere to a strict code of conduct that’s designed to protect older consumers.
The Equity Release Council is constantly updating their rules to ensure that homeowner’s needs are met.
Their latest announcement is that all lenders must now offer plans with the guaranteed right to pay back some of the loan and interest.
In addition, homeowners can stop and start these payments whenever convenient.
By paying off the interest, instead of allowing it to compound, the overall cost of your loan will significantly reduce.
Is It Safe to Release Equity From Your Home?
Yes, it is safe to release equity from your home, as long as you do so under the guidance of an Equity Release Council member.
Are the Dangers of Equity Release?
The dangers of equity release are draining your family of all their inheritance, but there is significant protection to help you avoid this. Your financial adviser will aid you through the entire process, helping you find the right balance.
What Makes Equity Release Safe?
The Equity Release Council and their tiredless commitment to safeguarding the industry and elderly citizens is what makes equity release safe.
Is Equity Release a Good Idea?
Yes, equity release is a good idea if confirmed by a financial adviser and you have opted for an Equity Release Council member.
When it comes to all things finance, safety is paramount. Fortunately, the equity release industry is protected.
So, if you unlock equity through a member of the Equity Release Council, you can do so with a sound mind and the means to live a stress-free retirement.
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Editorial Note: This content has been independently collected by the EveryInvestor 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.