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Common misconceptions of equity release

Equity release is commonly misunderstood by many people, with a number of myths. However, since 2007, when the government designed Lifetime Mortgages as part of the regulation of equity release, this has proved to be a solution for homeowners who need money for a variety of reasons. Although equity release is a popular option, some myths still exist.

One common misconception is that you won’t own your home once you sign up for equity release. This is completely untrue, as a lifetime mortgage ensures that your home remains yours throughout. The money which is owed will be repaid, along with the interest which has accrued, once the house is no longer a main residence.

Some homeowners believe that it isn’t possible to release any equity which has accrued in the home if there is an outstanding mortgage on the property. However, it is possible, although you will have to clear the outstanding mortgage debt with savings or some of the equity which has been released. This is a popular option for many homeowners, especially those who had an interest only product which leaves the capital outstanding.

The interest repayments are a concern for others, with the myth that monthly repayments are required, much like a mortgage. However, the interest which has built up on a lifetime mortgage can be repaid when the house is sold, or is no longer the main residence. If the house sells for less than the amount which remains outstanding on the loan, the balance will be written off.

Before considering equity release it is advisable to consult a CeMAP qualified mortgage advisor, who can give you the facts.

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