Unfortunately, we still see some people online calling Equity Release a ‘con’ or a ‘scam’, but this simply isn’t the case. And having helped hundreds of older homeowners live a better retirement by accessing some of the money locked up in their homes, we see the life-changing benefits of Equity Release first-hand. So why do some people still talk negatively about this form of borrowing? Perhaps it’s because Equity Release got off to a bumpy start in the 90s, and despite an overhaul of how the industry is regulated and operated, that negative reputation still lingers in some circles.
In the early days, there was a lack of proper regulation that led to a few highly publicised bad cases. The original ‘Home Reversion’ plans also allowed lenders to buy part or all of the borrower’s home at far below market price, which left a sour taste in some customers’ mouths. We of course feel for those affected at the time, but the industry has come a long way since then and today’s Equity Release plans should not be tarred with the same brush.
We’re not saying this form of borrowing is right for everyone, and in fact, it is a legal requirement to speak to a qualified advisor to help judge whether you are a good fit for Equity Release. Whether you decide to release equity or not, we believe that once you understand how modern plans work, you’ll at least appreciate how beneficial these products can be for some people. In this guide, we’ll have a look at the benefits and risks of today’s Equity Release plans, but if you want a deeper understanding of how they work and what plans are available to you, please chat to us here.
What Are the Benefits of Equity Release?
Modern Equity Release plans come with a host of benefits, which is why they have become one of the leading forms of later life borrowing. Let’s have a quick look at some of the benefits below.
Access money tied up in your home
The main benefit to Equity Release is that it allows older homeowners to access and enjoy some of the money they’ve worked hard for, which would otherwise be locked up in their homes. Doing this can lead to greater financial freedom in later life.
Ability to choose whether to make repayments or not
If you choose to let the interest roll up into the loan, you won’t have to make any repayments. Instead, the loan plus interest will only be paid back once you die, move into permanent care or sell your property. However, this option will mean that your loan compounds over time; if you’d like to prevent this from happening, you can choose to pay the interest as you go to protect your remaining equity.
Regulations and safeguards to protect borrowers
Equity Release is now heavily regulated, with the Financial Conduct Authority and the Equity Release Council putting safeguards in place to protect borrowers. There is no risk of you losing your home if you don’t make any repayments, and all of the plans we recommend come with a ‘no negative equity guarantee’, which means your estate will never owe more than your home is worth.
Option to drawdown equity as and when you need it
Some Equity Release plans now come with a drawdown option. This means you can release your equity into a special cash reserve, which you can draw from as and when you need to. Interest only accrues on the money you have withdrawn, not on the full amount you have released into the cash reserve, meaning your loan should compound at a slower rate.
Ability to move house, downsize or pay off your plan
Many Equity Release products allow you to move the plan to a new home as long as it’s deemed a ‘suitable alternative property’. Some plans also come with ‘downsizing protection’, which means you can move to a smaller property and pay off your plan without having to pay an Early Repayment Charge.
What Are the Risks of Equity Release?
Despite the benefits of Equity Release, this form of borrowing isn’t right for everyone. Below is a list of the potential downsides to be aware of. To learn more about these please read our guide, ‘What Are the Risks of Equity Release?’
• Your debt could increase over time
• The value of your estate may be reduced
• Your eligibility for certain benefits may be affected
• You may have to pay fees if you wish to end your plan early
The Bottom Line
Equity Release is certainly not a ‘con’. It’s true that these products aren’t right for everyone, but there are thousands of homeowners enjoying a better quality of life because of this form of lending. The industry has worked hard to repair the damage caused by a few unscrupulous lenders in the early 90s. Equity Release is now customer-focused, with safeguards and regulations in place to protect borrowers and flexible plans to cater for different needs. Whether you’re looking to supplement your retirement income; fund holidays, hobbies or home improvements; or help loved ones get on the property ladder – releasing equity could change your life for the better.
At Michael Usher Mortgage Services we’ve been helping our local community with trusted Equity Release advice for over 30 years. You probably have lots of questions, and we’re here to help you understand how these products work and whether they are the right choice for your situation. We’re never pushy, the decision is always yours to make, and we welcome your friends and family to join in the discussion.
Book your FREE initial consultation with one of our friendly advisors to learn more about Equity Release. We have offices in Frimley and Basingstoke, or we can help you remotely via phone or video call if you’d prefer. We look forward to chatting with you!
Book your FREE initial consultation
Equity release includes Lifetime Mortgages and Home Reversion Schemes. We can advise and arrange Lifetime Mortgages and will refer to an approved specialist for Home Reversion Schemes.
Lifetime Mortgages are applicable to over 55s only, can affect eligibility for means-tested or state benefits and may affect the inheritance you leave.
Please be aware that by clicking on the above links you are leaving Michael Usher Mortgage Services’ website. Please note that Michael Usher Mortgage Services nor HL Partnership Ltd are responsible for the accuracy of the information contained within the linked site(s) accessible from this page.
Michael Usher Equity Release acts as an introducer. Michael Usher Equity Release is a trading style of Michael Usher Mortgage Services Ltd. Michael Usher Mortgage Services Ltd is an appointed representative of HL Partnership Ltd, which is authorised and regulated by the Financial Conduct Authority.
