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Equity release: fact vs. fiction

Interested in equity release? This article sheds light on some of the more common misconceptions to help you understand equity release better. If you're interested in taking out a plan, you should also read 'Is it right for you?' carefully. 

Myth: You will leave your family in debt
Many people worry about leaving their children in debt after they’ve gone, however, this will never be the case
when you take out an equity release plan approved by the Equity Release Council (ERC).

These plans have a number of safeguards, including a ‘no negative equity guarantee’. This ensures that you, or your estate will never owe more than the value of your property and therefore no debt can be passed onto your estate.

This guarantee will be written into the offer. If your house was to decrease in value significantly, and the sale of the property does not provide enough to repay the plan, the ‘no negative equity guarantee’ means that the remainder of the debt will be written off upon your death or move into long term care.

Myth: You can't move house
Taking out an equity release plan does not mean that you have to remain in the same property for the rest of your life!

One of the standards set by the Equity Release Council is the right to move home and take your equity release plan with you.

NOTE - Whilst plans approved by the ERC will give you the right to move, they’ll only give you the right to move to a suitable alternative property. Generally a suitable property will be one which meets your equity release provider’s current lending criteria. If you were to move to a cheaper home, you may have to repay some of the amount owed.

Keep the following in mind:
• Certain construction types will not be acceptable to lenders. All properties will be subject to valuation.
• Farms, hotels, B&Bs and properties of non-standard construction are generally considered inappropriate for equity release plans

Fact: Equity release isn't for everybody
Although equity release is a great solution for some, it isn’t going to be the best solution for everybody. Key’s advisers will be honest and upfront with you - if they don’t think equity release is right for you they will tell you.

Myth: You can't leave an inheritance
Equity release will reduce the value of your estate, however, this does not restrict you from leaving an inheritance. In fact, with some plans, you CAN guarantee an inheritance for your loved ones which some of our customers choose to do.
NOTE - If you want to guarantee an inheritance, be sure to tell your adviser when you're asked about it during your first consultation. This way they can search for a suitable plan.

Myth: You will lose ownership of your home
With the most popular type of equity 

release plan, a lifetime mortgage, you keep full legal home ownership. However with a home reversion plan, homeowners sell a percentage of their home in exchange for a lump sum but can still remain in the home until death or entry into long-term care.

Fact: It's important to understand what equity release involves
If you decide to go ahead with equity release, then you'll need to meet with a specialist adviser to learn more. Our independent equity release advisers will give you the facts about equity release, including
  • How equity release will reduce the value of your estate and may affect your entitlement to means-tested benefits
  • How the most popular type of equity release plan, a lifetime mortgage, is a loan secured against your property
Unless you decide to go ahead, Key's service is completely free of charge as Key's usual advice fee of 1.99% of the amount released would only be payable on completion of a plan, subject to a minimum advice fee of £1,499.


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Our specialist advisers can explain equity release in more detail - book a free consultation to learn more.

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