Although the popularity of equity release has increased over the past few years, there are still many myths and fallacies surrounding it. Where has this left the industry? Simply put, too many people overlook, and disregard equity release due to the myths and poor information about the subject.
The truth is, equity release and a lifetime mortgage could well be a sensible option to free up some money for you to enjoy, as you wish.
In this article, we cover 8 myths surrounding equity release.
- It’s too costly
- If you or your partner passes away, you’ll be forced to move out
- You won’t own your home anymore
- You’ll need to make monthly mortgage payments
- Your children’s inheritance willbe eliminated
- If you still have a mortgage, equity release isn’t an option
- You must take all the equity from your property in one go
- Equity release is the last resort
Let’s get started with our equity release myth-busting article now!
Equity release myth #1: It’s too costly
We don’t feel this is the case.
Over the past few years, equity release products and the market, in general, have become more competitive.
This competitivity manifests in slightly lower interest rates.
Interest rolls up over the course of the lifetime mortgage, and is only paid back at the end of the term
Equity release myth #2: If you or your partner passes away, you’ll be forced to move out
This isn’t true.
If you have taken out a joint lifetime mortgage with a company like Aviva, the loan only needs repaying when you’ve both passed away or need long-term care.
Equity release myth #3: You won’t own your home anymore
This simply isn’t true.
Equity release means you are borrowing against the value of your property.
It doesn’t mean you are selling it to the lender.
Unlike conventional homeowner mortgages, there is no fixed term with a lifetime mortgage.
Equity release myth #4: You’ll need to make monthly mortgage payments
This isn’t true.
There are no monthly payments to make with your lifetime mortgage.
Interest gets rolled up over time.
This only gets paid back once your property is sold.
Related reading: What is a lifetime mortgage and how does it work?
Equity release myth #5: Your children’s inheritance will be eliminated
Not necessarily true.
You are free to use the cash released from your property as you wish.
This could mean your children get an early inheritance.
You could help them get on the property ladder.
It could pay for their children (your Grandkids) to go to private school.
Equity release myth #6: If you still have a mortgage, equity release isn’t an option
Equity release is an option for those still paying off a mortgage.
The cash you release from your property can be used to clear your mortgage.
Equity release myth #7: You must take all the equity from your property, not a percentage you are comfortable with
In the past, this was true. However, there is now greater flexibility as many lifetime mortgage providers offer alternative equity release products.
By taking smaller sums of money, rather than in one fell swoop, you reduce the amount of unpaid interest added to the loan each month.
Equity release myth #8: Equity release is the last resort
This isn’t the case.
Equity release has so many benefits it most definitely isn’t the ‘last resort’.
It can provide you with funds for a happier retirement.
You can pass on an inheritance early to your loved ones.
How about private school fees for your grandchildren?
Equity release could help you spruce up your property, or pay for some healthcare.
Looking for equity release advice?
Our Practice Principal, Ian Batterbee is qualified to provide advice on equity release.
He is also a seasoned pensions and retirement planning expert.