Equity Release FAQs
What is the no negative equity guarantee?
All lifetime mortgages from Equity Release Council members carry a no negative equity guarantee. When your home is eventually sold, you (or your estate) will never owe more than the sale proceeds · even if rolled-up interest has pushed the debt above the property's value. Any shortfall is absorbed by the lender, not passed to your family.
How does equity release affect inheritance?
Equity release reduces the value of your estate because the loan plus rolled-up interest must be repaid from the sale of your home when you die or move into long-term care. At a typical 6.5% rate the debt doubles roughly every 11 years, so releasing 30% of your home's value at 65 could consume well over half the property by your late 80s. Some plans offer inheritance protection, ring-fencing a fixed percentage of the sale proceeds for your beneficiaries · at the cost of a lower maximum release.
Can I move house after taking equity release?
Yes. Equity Release Council standards require all plans to be portable, meaning you can transfer the lifetime mortgage to a new property provided it meets the lender's criteria. If you downsize to a cheaper home you may need to repay part of the loan, and some plans include downsizing protection that waives early repayment charges in that situation.
What is a drawdown lifetime mortgage?
A drawdown lifetime mortgage lets you take an initial smaller amount and hold the rest in a reserve facility to draw on later. Interest is only charged on money you have actually taken, not the reserve, so total roll-up is usually far lower than taking a single lump sum. The trade-off is that each drawdown is charged at the interest rate prevailing at the time, which may be higher than today's rate.
Are there early repayment charges on lifetime mortgages?
Most lifetime mortgages carry early repayment charges (ERCs) if you repay the loan in full during the early years · sometimes 25% or more of the amount repaid on older gilt-linked plans, or a fixed step-down scale (for example 10% falling to 1%) on modern fixed-ERC plans. Council standards allow penalty-free repayment if you move into long-term care or after the first borrower dies, and most plans now allow 10% a year voluntary partial repayments without any charge.
Do I need financial advice to take out equity release?
Yes. FCA rules require that equity release is only sold with regulated financial advice, and you must also receive independent legal advice before completion. Look for advisers and lenders who are members of the Equity Release Council, which enforces the no negative equity guarantee, the right to remain in your home for life, and portability. Advice matters because equity release can affect means-tested benefits, and there may be cheaper alternatives such as downsizing, a retirement interest-only mortgage, or simply using savings first.
For informational purposes only · Not financial advice · Maximum LTVs are indicative and vary by lender, health and property type · Equity release requires regulated financial and legal advice · House price growth of 3% is an assumption, not a guarantee