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Is equity release safe

Written By:
Myles Robinson - Expert Finance Advisor

Posted: Oct 24, 2022

Is equity release safe and is it a good idea?

Equity release products are safe because they are regulated by The Financial Conduct Authority (FCA), and governed By the Equity Release Council. You will always be the owner of your home with lifetime mortgages.

Any increase in its value is yours. All of this, plus Equity release plans. There is no guarantee of negative equity but this has two downsides: your inheritance will be lessened, and you could lose means-tested benefits.

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Equity release is a safe way of borrowing?

Equity release is a great option for homeowners over 55 to borrow money to supplement incomes, pay off debts, or help their loved ones financially.

We understand that equity release mortgages can be a significant financial decision. Our experienced and patient advisers offer quality advice from all markets without pressure. We will explain the benefits and the possible pitfalls and tell you if an equity release is not right for you.

You won’t have to make any difficult decisions for yourself or your family. Use this equity release calculator to find out how much you could release.

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Is there anything that could go wrong with equity release?

You need to be aware of some financial risks associated with equity release. There are no dangers or pitfalls, but equity release could reduce the inheritance your family.

Like any other type of borrowing, the interest accrued and the amount borrowed must be repaid.

Equity release is unlike other types of borrowing in that you don’t need to make monthly repayments unless required. The total amount due could rise significantly as the interest is combined.

If you take out £100,000.00 at a 4% interest rate, your total debt will be £200,000 after 18 years.

You have many options to manage the balance and the lifetime mortgage program, and any features you choose are just a few.

Also, the value of homes tends to increase over time. In this case, your home could be worth more in 18 years than it is today.

This could help offset the amount that must be repaid. To determine the value of your estate after your plan is paid off, you can use our calculator.

You should also speak with your Equity Release advisor if you’re considering equity release. They can help you identify any means-tested benefits you might be eligible for, as they could cause you to lose them. Contact Loan Corp if you need advice from FCA regulated advisors.

This is because if you have a lot of benefits, borrowing large amounts of money in a lump sum may exceed your eligibility limits. There are ways to reduce this.

Lastly, many equity release plans come with high early repayment fees. If you feel that you might want to repay your plan in the future, talk to one our expert brokers by clicking the below button.

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Does equity release offer any other protections or safeguards?

Equity release is regulated

The equity release programs that existed many years ago were not regulated.

These schemes had the disadvantage of not offering modern-day legal protections. The Financial Conduct Authority (FCA) is the UK’s financial regulator and watchdog.

All lenders, brokers, and advisers must have the authorisation from the FCA to lend or give financial advice.

They must adhere to the FCA’s strict codes, and the FCA also protects consumers as they are regulated.

A strict Code of Conduct governs equity release

The Equity Release Council (ERC) has been the industry’s governing body since 1991.

The ERC has a strict Code of Conduct to protect consumers and keep them financially secure. These include:

  • You should seek legal and financial advice.
  • All products must include a “no equity guarantee” – this means that your loved ones won’t be able to repay more than your home’s value.
  • You can live in your home all your life.
  • All equity release applicants must meet at least once with an independent solicitor.

Equity release is an advisory financial product. This simply means you can’t take out a plan unless you have received appropriate financial advice from a qualified professional or broker such as one of our brokers at Loan Corp.

To become equity release advisors, advisors must have completed special qualifications. You can check the Equity Release Council member directory to confirm that your adviser is one of these individuals.

All Loan Corp advisers are qualified to give equity release advice, and we can help you today, start below now.

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Your solicitor will handle the legalities.

As stated above, at least one face-to-face meeting must be held with an independent lawyer as part of the equity release process. Your solicitor can provide financial advice but they will make sure that your paperwork is correct and avoid any legal pitfalls.

The flexibility of equity release

Equity release provides protections that traditional mortgages do not. It’s important to know these things before you consider equity release.

Most plans do not require repayments. You cannot default, get in arrears or have your home taken away for non-payment.

You can also customize the plans to suit your needs. These options are worth discussing with your equity release advisor.

  • Fixed interest rates are plans you can keep for the rest of your life. This means you will always know how much you have to repay.
  • If you want to repay your plan quickly, some penalties may apply.
  • You can make voluntary payments that are ad-hoc to help manage your future balance.
  • Compassionate early repayment fees allow penalty-free repayment of a plan within three years of the death or transfer into long-term nursing.
  • You can downsize protection, which allows you to repay your equity release plan without penalty and then move into your own home after your plan has been in place for at most five years.

Get started with your equity release application online below now:

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