Is equity release safe in 2020?

Equity release can be confusing and often difficult to wrap your head around. Put simply, equity release relates to the process of taking a tax-free, lump-sum from the equity (cash value) of your home, in a similar way to a mortgage.

When researching whether equity release is a suitable option for your circumstance, you may question how safe it actually is. This guide will aim to explain exactly what equity release is, and highlight some of the potential advantages and disadvantages it could have for you.

In this guide, we will answer some of the following questions:

  •         How does equity release work?
  •         Is equity release a good option?
  •         What are the advantages and disadvantages of equity release?
  •         What do other people think of equity release?
  •         Where can you get an equity release quote?

Equity release can allow you to unlock money from the value of your property while you live there. This can be done by taking out a policy/ mortgage that permits you to access the cash value of your home, and you can then use these funds as you wish. This article by the Financial Times provides more information about equity release.

How does equity release work?

Equity release is an attractive financial option to over 55’s who wish to use the equity tied up in their property to enjoy retirement or provide enough income to cover any future care needs.

A homeowner will borrow either a lump sum or regular monthly income in return for a portion of their home. The borrowed money equates to a value less than your property’s market value, with interest accruing on the borrowed amount.

Here is a short video on how equity release works

You can also watch this video on how does equity release work on youtube.

There are two main types of equity release; these are:

Lifetime mortgage

For those aged 55+, under a lifetime mortgage policy, you will borrow a fraction of your property’s value at a fixed interest rate. In contrast to a normal mortgage, under this policy you don’t make any repayments and interest can quickly accrue on the borrowed amount, increasing the amount you owe.

It is worth noting however that some versions of lifetime mortgage offer a drawdown option, which gives you the chance to pay back some of the owed interest, reducing the overall cost of the borrowed amount.


Home reversion plan

For those aged 65+, under a home reversion policy, your provider will make a tax-free lump sum payment to you, as a portion of your home’s value below market. This can allow you to remain in your home rent-free until you die.

Upon your passing, the proceeds from the sale of the property will be divided based on the percentage owned by yourself and the lender. As a result, if the value of your property increases during your time living there, so will the amount received upon selling.

This YouTube video featuring Martin Lewis gives an insight to equity release schemes.

Is equity release a good option?

Designed to be a commitment for life, you may become restricted by an equity release scheme should you:

– change your mind

– want or need to move house ; or

– wish to use your equity for another purpose later in life.

Below we have highlighted some of the pros and cons associated with equity release.

Advantages of equity release

  • You will receive a tax-free lump sum to spend on things you need
  • No monthly repayments, unless you opt for the lifetime mortgage plan which allows a repayment of some accrued interest
  • You retain ownership of your home while being able to continue to live there rent-free
  • It is impossible to owe more than the market value of your property
  • You may be able to take a ‘drawdown’ option, in which you would only pay interest on the money withdrawn, rather than the total amount
  • You are able to move home in the future, should you need to
  • You don’t have to have a mortgage-free property to enter an equity release scheme

Disadvantages of equity release

  • Interest rates are higher on the equity release costs
  • The money you owe can increase rapidly due to the high-interest rates
  • Your estate may lose value, which could have a negative effect on the value of any inheritance you wish to leave your loved ones
  • You may face early repayment charges if you repay early
  • Your entitlement to receive state benefits could be affected as a result of being part of an equity release scheme.
  • You are essentially dealing with your home, so you should not rush into an equity release scheme without first considering whether it is suitable for your situation.

Here is a video on the pros and cons of equity release.

You can also see this video on the pros and cons of equity release on youtube.

Equity release is considered safe since it is regulated by the Financial Conduct Authority (FCA). In addition to this, the majority of equity release providers are part of the Equity Release Council, which ensures you will never enter negative equity.

In order to be certain that your equity release scheme is safe and you are protected, just check that the provider you choose is part of the Equity Release Council.

This BBC article highlights how home equity release schemes could end up costing pension firms billions of pounds.

How much can you borrow from equity release?

Use this equity release calculator below to see how much money you could be entitled to. It takes about 30 seconds to do.

Equity release reviews

There are plenty of websites that can provide reviews of equity release schemes and how much you can from borrow from equity release, such as Over 50 Choices and Age Partnership. Here you can find advice and information from people who have taken out equity release schemes themselves.

As always, we recommend that you seek financial advice from an expert, to ensure you understand the implications surrounding equity release.  

Where can I get an equity release quote?

If you wish to gain more information and advice regarding equity release, you can contact us here at UK Care Guide, and we’ll be more than welcome to help you with any questions you may have. Our article on equity release can provide more information on where to get advice, including information on the best equity interest rates and providers in 2019.

Ultimately, if you wish to explore equity release further, you should weigh up the pros and cons, while taking into account expert advice which could help you better manage your finances later in life.

Summary of this page

1 - What is an equity release calculator

An equity release calculator will tell you how much money you could receive as a tax-free lump sum. The amount is usually dependant on your age and the value of your house.

2 - What sort of interest rates are applied to equity release mortgages?

Interest rates vary and can be anywhere between 3% and 7%. You can call us on 0800 953 3792 and get information on the latest deals, as they can change every day.

3 - Is the money from equity release tax-free?

Yes, the money you receive is tax-free. However, if you are in receipt of means-tested benefits then these can be impacted. You can contact us on 0800 953 3792 and see if you would be impacted.

4 - What can you use the money from equity release for?

The money from equity release can be used for a variety of things. Typically it is used to pay for long term care, modify your home to help with later life living or even to treat yourself to a holiday of a lifetime and help your family financially.

5 - What are the different types of equity release mortgage?

The most popular type is called a lifetime mortgage. If you are over 65 then a home reversion plan might be a better option, Get in touch with us and we will be able to tell you what we think would be best for you.



Recent reductions in interest rates mean that there are some great equity release deals available. Speak to our specialists. 

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