fbpx Mortgages and Furlough: How to get a mortgage after being on furlough. Read more Chevron
Arrow Arrow
Scroll to top

How Safe Are Equity Release Schemes?

Get the right advice about the whether equity release is right for you.

No impact on credit score

Pete Mugleston

Author: Pete Mugleston - Mortgage Advisor, MD

Updated: August 9, 2021

Equity release schemes are designed to give borrowers over 55 access to the cash tied up in their home, but it doesn’t come without its risks.

In this guide, we look at how safe equity release is, what the advantages and disadvantages are, and how you can get the right financial advice for your circumstances.

To see whether equity release is right for you, speak with one of the expert brokers we work with. They’ll be able to provide you with tailored advice to your situation and see if equity release is right for you or suggest an alternative.

Make an enquiry and we’ll match you with someone shortly.

Is equity release safe?

Equity release is much safer than it used to be. It earned a bad reputation due to the debt complications which arose between the 1980s-1990s which resulted in many losing their homes. Today, however, equity release products (including lifetime mortgages) are regulated by the Financial Conduct Authority (FCA), so you cannot lose your home through equity release.

The Equity Release Council approved schemes have safeguards to cover off the concerns most people have. As a result, equity release mortgages are now much safer than they previously were, though whether this product is right for you depends on your financial goals and personal circumstances.

What are the Equity Release Council guidelines and why are they important?

If you’re considering equity release, something to be aware of are the rules put in place by the Equity Release Council. These are important as they’re designed to protect homeowners in the worst-case scenarios.

Mortgage lenders who adhere to these rules are generally a much safer choice. This way you’re never at risk of losing your home or compromising the rest of your estate.

For information about mortgage lenders who are qualified by the Equity Release Council, make an enquiry and the experts we work with can discuss this further with you.

Feefo badge

What are the risks of equity release?

With lenders who adhere to the Council’s standards, equity release dangers could come in the form of the additional expenses (mainly in the form of interest) that you could incur by undertaking a release.

Many equity release agreements don’t come with the requirement for you to make monthly payments on the debt. Without paying the principal, the interest builds over time.

Aside from the interest, there are usually set-up fees. These can include the lender’s own arrangement fees, a surveyor’s valuation and the solicitor’s fees.

Could I lose my home?

No, this is not one of the issues equity release borrowers need to worry about. The seller only recoups their money when you’re no longer able to use the house, and you’re guaranteed ‘right to tenure’ until you pass away or go into long-term care.

Since equity release mortgages come with no risk of repossession, if you’re a borrower on a product such as an interest-only mortgage, it may be possible to refinance to an equity release product to make your home safe from repossession.

Could I lose any of my other assets?

No. Council guided lenders ring-fence your charge to the property itself, so they can’t take anything from the rest of your estate.

Will it affect my benefits?

Possibly. Moving money from your equity to your savings could affect your eligibility for pension credit and council tax benefit. Means-tested benefits like these can be adversely impacted by equity release whether you put the money into savings, spend it or even gift it.

The treatment by the Department for Work and Pensions (DWP) or local authorities is the same – it’s your money, so they will use it in their calculations for eligibility.

What’s the worst that could happen?

The Equity Release Council’s ‘no-negative equity guarantee’ ensures that you can never end up owing more than the value of your property.

The worst-case scenario is that you could incur significant debts that will be paid off when you’re no longer able to use the house. As a result, you might not be able to pass on the property to your inheritors (assuming you plan to leave something behind).

But don’t panic: specialist advice is available

There are a lot of scare stories out there about ‘the perils of equity release’, but you shouldn’t be put off by them – not only is it safer than it’s ever been, but you can also get the right advice before making any decisions.

The advisors we work with are experts in this area and can help you decide whether equity release is the right option for you, and since they have access to the entire market, they can introduce you to the lender offering the best deal for somebody with your needs and circumstances.

Speak to an expert

If you have questions and want to speak to an expert for the right advice, make an enquiry and we’ll match you with an expert shortly.

Ask a quick question

We can help!
We know everyone's circumstances are different, that's why we work with mortgage brokers who are experts in Equity Release Schemes.
Ask us a question and we'll get the best expert to help.

1 of 3
2 of 3
3 of 3 Send!

About the author

Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.

Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for OMA of course!

Read more about Pete

Pete Mugleston

Mortgage Advisor, MD

FCA disclaimer

*Based on our research, the content contained in this article is accurate as of the most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs.

Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

Maximise your chances of approval, whatever your situation. Find your perfect mortgage broker

Get the ‘YES’ you’ve been waiting for 👍

Our broker matching service will match you to a real human being who’s a specialist in your circumstances – for free!

Your expert will find you the best deal that’s right for you and be with you every step of the way.

Get Started