Fact vs Fiction: Equity Release Myths
Before we look at the equity release myths, let’s answer a common question: what is equity release?
Equity release allows homeowners aged 50+ to access some of the money tied up in their property while continuing to live in it. The most common form is a lifetime mortgage, which is a loan secured against your home that’s typically repaid when the property is sold, usually after you pass away or move into long-term care.
Many people use equity release to:
- Supplement their retirement income
- Pay off an existing mortgage
- Help family members financially
- Fund home improvements
- Buy a new property
Speaking with an experienced equity release advisor ensures you understand how it works and whether it suits your circumstances.
When it comes to equity release, there are also many myths in the market. We’re here to help clarify the fact from the fiction,
Myth 1: “Lifetime mortgages are a last resort”
This is one of the most common equity release myths.
In reality, lifetime mortgages are now a mainstream financial planning tool for homeowners over 50. Rising property prices mean many people have significant wealth tied up in their homes.
Modern equity release products offer far more flexibility than they once did, and interest rates are often more competitive than many people expect.
Today, many homeowners choose equity release proactively to support their lifestyle in later life.
Myth 2: “We can’t release money if we still have a mortgage”
Many people believe they must fully own their home before considering equity release.
In fact, one of the most common uses of a lifetime mortgage is repaying an existing mortgage.
For homeowners approaching the end of their mortgage term, switching to a lifetime mortgage can remove monthly mortgage payments and free up income during retirement.
Keen to learn more? Get in touch
Myth 3: “You can’t repay any of the loan”
Older products were less flexible, but that has changed significantly.
Most modern lifetime mortgages that meet Equity Release Council standards allow you to make penalty-free partial repayments each year.
Some products also give you the choice to:
- Pay some or all of the interest monthly
- Let the interest roll up over time
Making voluntary payments can help control how much the loan grows over time.
Myth 4: “We’d have to stay in the same property forever”
Not at all. Most lifetime mortgages allow you to move home and transfer the loan to a new property, a feature known as porting.
As long as the new property meets the lender’s criteria, your mortgage can move with you.
Myth 5: “I could end up owing more than my home is worth”
This is another outdated myth.
All plans that follow the Equity Release Council standards include a No Negative Equity Guarantee. This means when your home is eventually sold, you’ll never owe more than the value of the property, provided the terms of the loan have been met.
Myth 6: “I’ll lose ownership of my home”
With a lifetime mortgage, you remain the homeowner.
Just like a traditional mortgage, the loan is secured against the property, but you continue to own and live in your home.
Myth 7: “There’ll be nothing left for my family”
Equity release doesn’t necessarily mean there will be no inheritance left.
Once the loan is repaid from the sale of your home, any remaining value can still pass to your beneficiaries. Some lifetime mortgage products even allow you to ringfence part of your property’s value specifically for inheritance purposes.
Myth 8: “My family will inherit debt”
Another common concern.
Thanks to the No Negative Equity Guarantee, your loved ones will never inherit debt from a lifetime mortgage related to the property.
The loan is simply repaid from the sale of the home.
Myth 9: “Equity release isn’t regulated”
Equity release products are fully regulated by the Financial Conduct Authority (FCA).
In addition, lenders who are members of the Equity Release Council must meet strict consumer protection standards, including:
- The No Negative Equity Guarantee
- The right to remain in your home for life
- The option to make partial repayments
These safeguards ensure the process is safe, transparent and designed to protect homeowners.
Speak to an Equity Release Advisor in Exeter
Understanding how equity release works is the first step toward deciding whether it’s right for you.
At Exe Mortgages, our experienced equity release advisors in Exeter provide clear, personalised advice based on your circumstances, goals and long-term plans.
If you’re exploring your options or simply want to separate fact from fiction around equity release myths, we’re here to help.
Get in touch with Exe Mortgages today to speak with an experienced equity release advisor.
Frequently Asked Questions
- What exactly is equity release, and how does it work?
Equity release is a way of accessing some of the money tied up in your home without having to sell it or move out. It’s available to homeowners aged 55 and over in the UK. The most common type is a lifetime mortgage, where you borrow a lump sum (or draw money in stages) secured against your home. You continue to own your home and live in it. The loan, plus interest, is repaid when you die or move into long-term care, typically through the sale of the property. You never have to make monthly repayments unless you choose to.
- Could I end up owing more than my home is worth?
This is one of the most common concerns, and it’s a fair one. In the past, some products did leave people in negative equity. However, today all reputable equity release plans in the UK come with a no negative equity guarantee, a standard protection required by the Equity Release Council, the industry’s regulatory body. This means that no matter how long you live or how much interest accrues, you (or your estate) will never owe more than the sale price of your home. It’s a legal safeguard, not just a promise.
- Will equity release affect my benefits or tax position?
It can do, which is why getting independent financial advice is crucial before taking out any equity release product. A lump sum payment could affect means-tested benefits such as Pension Credit, Council Tax Reduction, or Universal Credit, depending on how much you receive and how quickly you spend it. The money itself isn’t taxed as income, but it may affect your eligibility for support. A qualified adviser will assess your full financial picture before recommending anything.
- What happens to my family's inheritance?
Equity release will reduce the value of your estate, since the loan and accumulated interest are repaid from the proceeds of your home’s sale. It’s understandable to feel concerned about leaving less behind. However, many modern plans offer an inheritance protection option, which lets you ring-fence a percentage of your home’s value to pass on, though this will reduce the amount you can borrow. It’s also worth having an open conversation with your family before making any decisions. A good adviser will encourage this, and some will even involve family members in the discussion if you wish.
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