Equity Release: 10 Myths That Need Retiring
Equity release has evolved significantly over the past decade, yet many outdated perceptions still persist. At Retirement Solutions, we believe in providing clear and accurate information to help you make informed decisions about your financial future. In this article, we will explain some of the most common myths surrounding equity release and behind this valuable financial planning tool for those in later life.
Myth 1: It’s unsafe and unregulated.
Myth 2: Equity release is a last resort option.
This is a common misconception. The increasing flexibility of lifetime mortgages and rising property prices mean that more people are using their property wealth to fund a variety of later life needs. The Equity Release Council’s Q1 2025 market report shows that total lending increased by 32% in Q1 2025 (£665m) compared to Q1 2024 (£504m), marking the fourth successive quarter of growth. This indicates a growing confidence in equity release as a proactive financial planning tool. Whilst it isn’t a last resort, its important to consider all avenues such as personal loans, downsizing, Retirement only interest mortgage (RIO) or Residential mortgages.
Myth 3: It is an expensive way to borrow.
Releasing equity with a lifetime mortgage doesn’t have to be expensive. There are various features available that can help you control the costs. For instance, you could release equity in stages using a drawdown facility, only taking the money as and when you need it. Alternatively, you can choose to make optional payments to control the impact of interest. With interest rates fixed for life, you will always have a clear understanding of the potential costs involved. However, by not making repayments the interest on an equity release loan will compound and may effect future financial options.
Myth 4: I will leave debt to my family and loved ones.
With products that meet the Equity Release Council standards, as long as the terms and conditions are met, no debt will be left to your estate. You will never owe more than the value of your home once it is sold upon your death or if you move permanently into long-term care. Equity Release will reduce the value of your estate and affect inheritance for your family and loved ones in the future unless repayments are made.
Myth 5: I can’t release equity if I have an outstanding mortgage.
This is not the case. In fact, one of the most common uses of equity release is to pay off an existing mortgage. This can free up income that was previously used for mortgage repayments. While using equity release to repay an outstanding mortgage could cost more in the long term, it can be a reliable solution for those entering retirement with limited income who may not qualify for a traditional mortgage. It is however always recommended to discuss your options with your current mortgage provider to check if they can offer any different terms which may benefit you in the long term.
Myth 6: It’s not possible to reduce the outstanding debt.
As of 28 March 2022, all products that meet the Equity Release Council standards must offer the right to make penalty-free partial repayments. This means you can make partial repayments on your loan without incurring early repayment charges, typically up to a fixed amount each year. Some products also offer fixed early repayment charges for a set period, after which there is no charge. Additionally, some products give you the option to pay the monthly interest, which can help to limit the growth of the debt over time.
Myth 7: I will owe more than the value of my home.
Products that fully meet the Equity Release Council’s Product Standards are required to feature a “no negative equity guarantee”. This means that, provided you meet the product’s terms and conditions, you will never owe more than your home is worth when it is sold, even if this is less than the amount owed. This applies upon death or when moving into permanent long-term care.
Myth 8: I will lose ownership and control of my property.
With a lifetime mortgage, you retain full legal ownership of your home, just as you would with a traditional residential mortgage. The property remains yours for life, as long as you live there and meet the terms of the loan. In the case of joint borrowers, the loan is only repaid when both applicants have passed away or moved into long-term care. The lender does not take control or ownership; they simply hold a charge against the property, similar to a standard mortgage lender.
Myth 9: I must stay in the same property for the rest of my life.
Most lifetime mortgages allow you to move home and transfer the loan to the new property, provided it meets the lender’s terms and criteria. However, its recommended to discuss with the lender first to make sure it meets their terms and criteria.
Myth 10: I won’t be able to leave the property as an inheritance.
A lifetime mortgage is usually repaid from the sale of the property after you move into permanent long-term care or pass away. Any money left over after the loan has been repaid can go to your beneficiaries. Some product providers also allow you to ringfence a portion of your home’s equity to leave as an inheritance. Equity release will reduce the value of your estate and could affect the amount of inheritance due to your beneficiaries based on repayments.
Making an Informed Decision
Equity release is no longer the misunderstood product it once was. With strong consumer protections, flexible repayment options, and increasing demand, it’s time to retire these outdated myths for good.
At Retirement Solutions, we are committed to helping you make an informed decision. We can provide you with a personalised illustration, showing exactly how much you could owe over time should you choose to release equity. This will allow you to consider different plans and decide whether you want to make any payments over time.
