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Is equity release a good idea

Written By:
Myles Robinson - Expert Finance Advisor

Posted: Oct 24, 2022

Is equity release a good idea?

As mortgage brokers, we often get asked, “is equity release a good idea?” Is equity release safe? Are lifetime mortgages popular?

Equity release, like all financial products, is not suitable for everyone. However, for some people, equity release schemes can unlock money held in their property and make a big difference.

This is true whether they want to improve their home, consolidate debt, or gift money to loved ones. Be careful before you secure other debts against the house.

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How do I get started with equity release?

Over 55-year-old homeowners in the UK are increasingly interested in equity release because of the cash lump sum option. You might feel the same way. Using your property wealth to access cash now with no repayments after your death could appeal to you.

Equity release is not the best choice for everyone. There are potential disadvantages. We’ll discuss the benefits and drawbacks and where to find guidance before making your final decision.

You may have used our equity release calculator online but now have questions in your head. Good news, click the link below to speak with an equity release adviser. Our equity release specialist can answer all your questions and then introduce you to an equity release provider suitable to you.

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Are equity releases a good idea or a bad idea?

Suppose the circumstances are right, yes. Equity release can be a viable option for homeowners with property wealth they prefer to access during their lifetime rather than passing on after they die.

Many people see the benefits of generating tax-free income from their property. However, it is crucial to seek professional advice before doing so.

This type of borrowing is not suitable for everyone. Before you go ahead, there are other options and important considerations. Do you want to be able to ring-fence capital that you wish to pass on as an inheritance?

All of this being said, it is difficult to give a universal answer to the question. However, if you continue reading, you will be able to see if an equity release is suitable for you.

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Equity release has many benefits.

These are some of the reasons you might consider equity release.

You will receive a lump sum of cash that is tax-free

Cash will be available to you to purchase whatever you need or want. Although you may be able to sell other assets to obtain some money, this could result in a capital gains tax. Equity release is exempt from income, capital gains, and other taxes.

There are no repayments during your lifetime.

You would have to repay the loan immediately if you took out another type of loan against your home. Equity release is only available after your death. Some lenders will let you make monthly repayments during your lifetime, but not all. You could leave more wealth for your loved ones when you pass away.

You can still live in your home.

You can also sell your house and move to a smaller, more affordable home to gain some of your property wealth. Equity release is an option if you prefer to remain where you are. As long as your lender is part of the Equity Release Council, your right to stay in your home until your death or move into long-term care is protected.

Your loved ones won’t inherit your debt.

Many equity release programs include a “no equity guarantee”. This guarantees that you will never be required to repay more than your home’s value. Your loved ones won’t be held responsible for debts that are not paid, even if the housing market plummets and the property is sold for less than the loan amount.

You might still be able to pass wealth on to your loved ones

Lenders may allow you to ring-fence a portion of the value of your home to pass on to your family after your death. This could mean you have less money to spend right now.

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Potential pitfalls in equity release

These are the risks associated with equity release.

Less will be left to your loved ones.

You will have less property wealth to leave your loved ones if you do not choose to inherit it in your lifetime. After your home has been sold, the loan amount, interest and fees have been paid; you may not have much left for them to inherit. Sometimes there is nothing.

Your home will not be sold.

Your family will lose the loan if your home has to be sold to pay it off. While some lenders may allow your loved ones, like existing savings, to repay the loan, this is not always possible.

There are also costs.

There may be an application, a solicitor’s, and a valuation fee. There will be an early repayment fee if you decide to cancel your equity release agreement or repay the loan within your lifetime.

It could impact your benefits.

After you receive the cash lump sum from your equity provider, you may lose any means-tested benefits such as pension credit or council tax assistance.

Remortgaging will be difficult.

Equity release will result in a charge on your property. It will be challenging to raise capital for your home in another way, such as a remortgage.

You should be wary of rogue providers.

Many equity release providers choose to join the Equity Release Council. They must also offer a “no-negative equity guarantee” and the ability to stay in your home until you can move into long-term care. These features might not be available if the provider is not a member.

How a broker can assist with equity release

Before you decide to release equity, you must seek professional advice from an independent financial adviser. Click start now below to apply.

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Although equity release companies can help you connect with an independent financial advisor, an independent broker will give you more objective advice. Here are some ways they can assist:

  • You can ring-fence a portion of the property’s value to ensure you have some savings for your loved ones.
  • Find a lender that will allow your loved ones to repay the debt without selling your home.
  • We can help you find the best deal for your situation while keeping fees and costs to a minimum.
  • Discuss your financial situation with us. Also, discuss any potential benefits if equity release is pursued.
  • We will discuss with you other options than equity release. These could include remortgaging the home with a conventional loan.
  • Only sell products that Equity Release Council has approved.


Talk to an expert in equity release.

We have relationships with all major lenders and can provide impartial advice on the market.

We have many specialists in lifetime mortgages and equity releases. Click the link below to begin your mortgage journey with an expert equity release advisor.

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Is equity release secure?

You are protected against significant risks such as losing your home, entering negative equity, and even passing on debt to your family members, as long as your provider is part of the Equity Release Council.

Other risks include the possibility that you may lose some of your benefits income. Before proceeding, you should discuss all of these with a specialist.

How much does equity release cost?

Your provider will determine the cost of a lifetime mortgage or equity release product. Look out for arrangements and solicitor fees to pay for equity release.

You have a few options to pay back the permanent interest. You have the opportunity to pay some, all or none of your interest each month. You can also pay less interest to reduce the total cost of the loan. This could allow you to leave a larger inheritance for your family when you sell your home.

You will have to pay the interest every month if you don’t pay it back.

Positively, you don’t have to worry about negative equity. Our lifetime mortgage comes with no negative equity guarantee. This means you won’t owe more on your home than it is worth. There may be cheaper options to borrow money, but terms and conditions apply.

If I have equity release, can I still sell my house?

Yes, you can. A lifetime mortgage is a loan secured on your home that can be transferred to your new property.

Your lender must be satisfied with the property. For example, we won’t lend against properties with thatched roofs. You might have to repay some of the loans if you move down. This could lead to early repayment fees.

The loan must be repaid if you’re selling your property and not moving to a new one. There could also be significant early repayment fees.

We will make sure that nothing surprises you.

Is inheritance tax affected by equity release?

A lifetime mortgage will affect the amount of inheritance you can leave.

Equity release can gift your grandchildren or children an early inheritance or a ‘living inheritance’. However, if you die within seven years, you may have to pay inheritance taxes on the gift.

How can equity release help your inheritance plans?

There are several ways to protect your family’s inheritance. If you wish to leave a fixed inheritance, you can choose an inheritance protection product. This will reduce the amount you can borrow, but it will ensure that a fixed amount remains as an inheritance for your loved ones.

You can repay some or all of your interest, which will reduce the amount you owe. This will leave more to your family to inherit.

Read more on equity release below:

Let us get you approved for equity release today, start below now:

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