How much do you already know about Equity Release?
Here’s seven of the most common myths we regularly put straight.
1. Equity Release isn’t regulated.
Equity Release is very closely regulated by the Financial Conduct Authority (FCA). All Equity Release providers, lenders, and advisers have to have permission from the FCA to sell Equity Release products and have to pass appropriate exams to do so as well as having to maintain a regime of ongoing professional development in order to keep up to date with an ever changing marketplace.
2. I could end up in negative equity with an Equity Release plan.
This is impossible. The trade body for the Equity Release industry; The Equity Release Council (ERC), has a statement of principles which includes a “no negative equity guarantee” which ensures that you, or your family will never need to pay back more than the value of your home.
3. You can’t move house once you have an Equity Release plan.
Yes, you can. Equity Release plans are portable between properties. The exact details will depend on the value and type of the new property as well as it’s condition and location among other things. Lenders will be happy to talk to you about your options and the best course of action is to discuss your plans with the lender or your adviser at the earliest opportunity.
4. I will have to pay tax on any money I take from an Equity Release plan.
No. Any money you take from an Equity Release plan is tax free. In fact, many people take Equity Release plans as part of their tax planning strategy. A good advisor will always discuss your financial situation and ensure all the implications of proceeding are fully understood before recommending any course of action.
5. If I take an Equity Release Plan then my relatives will be left with nothing.
What actually happens on your death, or the second death in the event of a joint plan, is that the property is sold and the outstanding balance owed on the Equity Release plan is repaid to the lender. The same is true if you have to go into long term care. Any money available from the sale of the property after the outstanding balance has been repaid will form part of your estate and be distributed as per the instructions in your will. It is even possible that you can build in to your plan a guarantee that will mean your family will inherit a minimum amount.
6. If my partner has to go into long term care, I will be forced out of the house.
Absolutely not. You are guaranteed the right to live in your home until you die or have to go into long term care. In the case of a joint plan, then that guarantee applies to both of you.
7. I can’t get an Equity Release plan as I already have a mortgage.
There is no reason why having an existing mortgage will stop you taking an Equity Release plan. In fact, many people use their Equity Release plan to clear their existing mortgage and benefit from not having to make any further mortgage repayments. There are many factors to take into account when considering this as an option, not least the size of the existing mortgage and the amount available to you under an Equity Release plan. Talking through your ideas with a qualified adviser will quickly establish whether it is an appropriate idea for you or not.