Our Mortgage-Approval Guarantee - We're so confident in our service, we guarantee it - or £100 back* Read more Chevron
Arrow Arrow
Scroll to top

Equity Release Advantages and Disadvantages

Like many financial products, equity release has both benefits and risks. Here, you’ll find a summary of both, to help you decide if it’s right for you.

Get Started With A Broker Ask Us A Question

Ask Us A Question

We know everyone's circumstances are different, that's why we work with mortgage brokers who are experts in all different mortgage subjects.

Ask us a question and we'll get the best expert to help.

Feefo 5 Stars
1 of 3
£
£
£
2 of 3
3 of 3 Send!

No impact on credit score

4.8 out of 5 stars across Trustpilot, Feefo and Google! Our customers love Online Mortgage Advisor

Pete Mugleston

Author: Pete Mugleston - Mortgage Advisor, MD

Updated: June 14, 2022

Equity release is growing in popularity with UK homeowners over the age of 55. Like them, you might be attracted by the idea of accessing your property wealth to get cash to spend now, with no repayments until after you die.

However, equity release isn’t the right choice for everyone. There are some potential downsides to consider. In this article, we’ll discuss the advantages and disadvantages along with where you can look for guidance before making your decision.

We’ll explain the following topics…

Is equity release a good idea?

Yes, it can be, if the circumstances suit. Equity release is a viable option for homeowners with property wealth that they would prefer to access in their lifetime rather than pass on when they die.

For many people, there are benefits to unlocking tax-free cash from your property, but seeking professional advice before you do so is vital.

This form of borrowing isn’t right for everyone. There are alternatives to consider and important factors to take into account before you press ahead. For example, do you want the option to ring-fence some capital to leave behind as inheritance?

With all of this in mind, it’s difficult to provide a ‘one-size-fits-all’ answer to this question, but if you read on, you’ll get a clearer idea of whether equity release is a good idea for you.

Get Started With A Broker Ask Us A Question

Ask Us A Question

We know everyone's circumstances are different, that's why we work with mortgage brokers who are experts in all different mortgage subjects.

Ask us a question and we'll get the best expert to help.

Feefo 5 Stars
1 of 3
£
£
£
2 of 3
3 of 3 Send!

Benefits of equity release

Here are the main reasons why you might want to consider equity release, and some of the positive features you might not be aware of:

You’ll receive a tax-free cash lump sum

You’ll get cash to spend on whatever you want or need. You may also be able to get cash by selling other assets you own, but doing so could incur a capital gains tax charge. With equity release, there is no income tax, capital gains tax, or any other tax due to the cash you receive.

There are no repayments in your lifetime

If you were to take out another type of loan against your home, you’d have to begin repaying it immediately. With equity release, this is only necessary after you die. Although, some lenders will allow you to make repayments in your lifetime, if you’d like to. By doing so, you could have more wealth to pass on to loved ones after you’re gone.

You can continue to live in your home

Another way to access some of your property wealth in your lifetime is by selling your home and moving to a smaller, cheaper one. But, if you’d prefer to stay where you are, equity release allows you to do that. Your right to remain in your home is protected until you die or move into long-term care, as long as your lender is a member of the Equity Release Council.

You won’t pass on debt to your loved ones

Most equity release schemes include a “no negative equity guarantee”. This means that, no matter what, you will never have to repay more than the value of your home. Even if the housing market falls, and your property sells for less than the loan amount and interest due, your loved ones will not be responsible for the remaining debt.

You may still be able to pass on wealth to your loved ones

In certain cases, lenders will allow you to ring fence a percentage of your home’s value, to be passed on to your loved ones after you die. However, this might mean that you get less cash to spend now.

Potential pitfalls of equity release

Here are some of the risks with equity release, that come with the positives, you need to be aware of.

Your loved ones will inherit less

If you choose to access your property wealth in your lifetime, you’ll have less to pass on to your loved ones after you die. Once your home is sold and the loan amount, interest, and fees are paid, there may not be much for them to inherit. Sometimes, there is nothing at all.

Your home won’t be passed on

If your home must be sold after your death to repay the loan, it will no longer be kept in your family. Some lenders will allow your loved ones to repay the loan through other means, such as existing savings, to avoid selling the home, but this isn’t always an option.

There are costs involved

You may need to pay an application fee, solicitor’s fee, and a valuation fee. If you decide at any time that you’d like to leave your equity release agreement and repay the loan in your lifetime, there will often be an early repayment charge.

It could affect your benefits

If you receive means-tested benefits, including pension credit or council tax support, you may no longer be entitled to these after you receive a cash lump sum from your equity release provider.

It will be difficult to remortgage

Choosing equity release now will mean that there is a charge against your property. If you later decide that you’d like to raise capital against your home another way, such as remortgaging, this will make it difficult to do so.

There are some rogue providers to look out for

Most equity release providers opt to be members of the Equity Release Council. This means they must offer a “no negative equity guarantee” and the right to remain in your home until you die or move into long-term care. However, if you sign a contract with a provider who is not a member, they might not offer these features.

We're so confident in our service, we
guarantee
it.

We know It's important for you have complete confidence in our service, and trust that you're getting the best chance of mortgage approval. We guarantee to get your mortgage approved where others can't - or we'll give you £100*

How a broker can help with equity release

It’s essential to seek expert advice before you make your final decision about equity release. While equity release providers can connect you with an adviser, you’ll get more impartial advice from an independent broker. Here are some of the ways they can help:

  • Find you a deal that allows you to ring fence some of the property value, so you have peace of mind there’ll be some money left over for your loved ones
  • Identify a lender who will allow your loved ones the opportunity to repay the debt without selling your home
  • Help you to find the cheapest deal for your circumstances, keeping costs and fees to a minimum.
  • Work with you to understand your full financial situation, including any benefits that could be affected if you proceed with equity release.
  • Advise you on your other options besides equity release, which could include remortgaging your home with a conventional mortgage.
  • Only offer you products that are approved by the Equity Release Council

Summary of pros and cons

The table below summarises the positive and negative features of equity release very briefly. You shouldn’t rely on this to make your decision. Instead, you should speak to an expert who fully understands your financial situation and how equity release will affect it.

Advantages Disadvantages
Tax-free cash now Less to inherit
Staying in the family home for your lifetime Losing the family home after your death
No repayments now Some upfront costs involved
No debt for your loved ones Can impact benefit income
Opportunity to pass on wealth Can impact future financing options

Equity Release Calculator

If you’d like to find out how much equity you may be able to release from your property take a look at our easy to use calculator here:

calculator icon

Equity Release Calculator

You can use our equity release calculator to work out how much capital you can release from your home. Simply enter your age and the property’s value and the tool will do the rest.


Estimate if you're unsure
£
For joint applications the amount you can release is based on the age of the youngest applicant
years old

Maximum Equity you could release:

The amount is of your homes value, the maximum most borrowers your age can release.

Get Started with an Equity Release Specialist and find out exactly how much you could release.

Get Started

Speaking to an equity release specialist

For help making a decision about equity release, you should speak to an expert who has relationships with all the major lenders and can offer unbiased advice about the whole market.

We work with numerous specialists in this area and can connect you with one of them for a free, no-obligation chat to discuss whether equity release is right for you. So, if you have any questions you need answering, call us today on 0808 189 2301 or make an enquiry here.

FAQs

Is equity release safe?

As long as your provider is a member of the Equity Release Council, you are protected from major risks, such as losing your home in your lifetime or entering negative equity and passing on debt to your loved ones.

There are certain other risks involved, such as the possibility of losing some of your benefit income. You should discuss these in detail with a specialist before proceeding.

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 Mortgages

Ask us a question and we'll get the best expert to help.

Feefo Stars
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 equity release broker

Don't miss out...

Sign up for the latest market news, new lender product information and helpful tips and advice from our experts!

Close icon