Analysing Equity Release Product Safety
Equity release products, such as a lifetime mortgage, are designed for people over 55 and who have equity tied up in a property.
As a quick summary:
- You apply for up to around 50% of the value of your home.
- The lender either pays a lump sum, or you can make smaller withdrawals.
- Interest accumulates but is added to the total debt balance.
- When you die or enter into care, the lender sells the property.
- The proceeds are used to repay the debt, and the balance goes to your estate.
There are many horror stories about vulnerable pensioners being tricked into losing their homes.
Still, a lifetime mortgage or an equity release loan from a reputable lender is a legitimate and inherently safe product.
Of course, the downside is that your property will usually be sold (unless you have other wealth or assets that your beneficiaries can use to pay back the debt).
However, millions of homeowners use this type of loan to finance a comfortable, enjoyable retirement.
The Risks of Equity Release Explained
It's always essential to go into any financial agreement with your eyes open - but much of the scepticism about equity release mortgages dates back to the 80s and 90s when standards were very different.
Some borrowers lost their homes, usually because the lender wasn't regulated - today's mortgage lenders are all authorised by the Financial Conduct Authority (FCA).
Whether a specialist equity release provider or a high street bank, every lender must be FCA regulated to offer lending products to private applicants.
You cannot lose your home by taking out an equity release product - for as long as you live.
The Equity Release Council approves schemes that have appropriate safeguards, which mitigate all of the concerns you may have.
Equity release is now safer than ever, although it is still important to review your financial circumstances and think carefully before you make a decision.
