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8 equity release myths busted

Your Money
Tuesday 22 December 2020
Freeing up cash with equity release has helped thousands of older homeowners help fund retirements and fulfil dreams. But myths about using property wealth to help in later life surprisingly continue to exist.

It’s time to separate the equity release myths from the facts. Here are some of the most common equity release and lifetime mortgage questions answered:
  1. I have to pay tax on the money released with an equity release plan 
    No. Cash released with an equity release plan is tax free and can be spent on many different things. Some of the most popular are helping out family, paying off an existing mortgage, repaying existing debts such as credit cards and helping to cover everyday bills. You should always think carefully before securing a loan against your home.
  2. I’ll have to make monthly repayments with a lifetime mortgage
    If you want to make monthly repayments, there are plans you can choose to do so. However, typically with a lifetime mortgage, there are no monthly repayments to make, as the loan plus roll up interest is usually repaid when the plan comes to an end.
  3. If I take out equity release, I won’t own my own home any more
    Key Equity Release offer lifetime mortgages only, the most popular form of equity release, which is a loan secured against your home. But, with our lifetime mortgage plans, you’ll still continue to own your own home and can live in it as long as you choose. 
  4. I could end up owing more than my home is worth
    Absolutely not. All of our plans come with a no negative equity guarantee, meaning you’ll never owe more than your home is worth.
  5. Equity release isn’t safe
    All of our plans meet the Equity Release Council’s standards which ensure equity release products are safe and reliable for consumers. We’re also regulated by the Financial Conduct Authority (FCA), which gives you additional security and protection.
  6. If I take out a lifetime mortgage, I won’t have anything to leave my loved ones.
    Equity release will reduce the value of your estate and may affect your entitlement to means tested benefits. Whereas some choose to leave an inheritance early, by gifting some or all of their equity release funds, others can choose the inheritance protection feature which ring-fences a percentage of your home’s future value to leave as an inheritance for loved ones.
  7. I have to take out the cash as a lump sum
    Only if you want to. We also offer something called a drawdown lifetime mortgage that could help boost your retirement income or provide regular financial support. With this type of plan you firstly agree an overall sum of money you can borrow. You can then take an initial lump sum and following that release smaller amounts when needed (subject to minimum amounts).
  8.  If I take your equity release advice, I’ll be expected to commit to taking out a plan
    Absolutely not! There’s no pressure to go ahead. During your appointment your adviser will give you all the information you need about equity release for you to make an informed decision, in your own time. They’ll discuss other options with you and, if equity release isn’t right for you, they’ll tell you.

Still have equity release questions? Download our free guide and find out how equity release works, what plans there are and read real life stories from those who have released funds from their home.
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Page last updated: Wednesday 20 January 2021