Modern equity release is regulated and built around safeguards designed to protect you, here is how those protections work and what to weigh up before you proceed.
It is one of the most common questions homeowners ask before releasing money from their property, and an understandable one. Equity release is a long-term commitment, so it is right to want reassurance that your home and your family are protected. The good news is that today's plans are far removed from the products that gave the sector a poor reputation decades ago.
Equity release refers to lifetime mortgages and home reversion plans. Both are now built around two layers of protection: regulation by the Financial Conduct Authority, and the inbuilt product features and standards designed to safeguard you. Below we explain how each works.
Equity release is regulated by the Financial Conduct Authority (FCA), the same body that oversees mainstream mortgages and other financial products. That means plans must be sold through advice, the costs and risks must be set out clearly, and you have access to the Financial Ombudsman Service if something goes wrong.
Most plans are also backed by the standards of the Equity Release Council (ERC). The ERC sets the standards, protects the rights of consumers and raises awareness of both lifetime mortgages and home reversion plans as a useful tool to help with later life planning. Plans that meet ERC standards come with a set of guarantees:
Beyond regulation, modern lifetime mortgages include features designed to give you control and peace of mind. The first is that no monthly repayments are automatically required. This removes any risk of falling into arrears or having your home repossessed for non-payment.
Other features include:
Taken together, these protections mean the worst-case scenarios that worried earlier generations, falling into negative equity and having a home repossessed, or family members being left with a large additional bill, are no longer how regulated equity release works.
Equity release will reduce the value of your estate and may affect your entitlement to means-tested benefits. To understand the features and risks, ask for a personalised illustration.
Safe does not mean right for everyone. Because interest can compound over the life of the loan, equity release reduces the value of your estate and the inheritance you can leave, and it may affect your entitlement to means-tested benefits. The way you take your money also matters: our guide to the equity release loan drawdown options explains how taking funds in stages, or servicing the interest, can limit how much the debt grows.
It is also worth understanding the trade-offs of each product type. Our guide to the pros and cons of lifetime mortgages and home reversion plans sets these out side by side so you can see which approach best fits your circumstances.
The single most important safeguard is regulated advice. An adviser will explain the implications fully, consider whether alternatives such as downsizing or other borrowing might suit you better, and only recommend equity release where it is genuinely appropriate. You can call us on 01322 553282 or contact us online.
Equity release is not one-size-fits-all. Speak to an adviser who will explain the protections, the costs and the implications, and recommend the most suitable route for your circumstances.