The truth about equity release: 10 myths that need retiring
25 June 2025
Equity release has evolved significantly over the past decade, yet many outdated perceptions still persist. Let’s bust some of the most common myths and reveal the truth behind this valuable later life lending option.
Myth 1: It’s unsafe and unregulated.
Lifetime mortgages are regulated by the FCA. Consumer protection specifically for this market has been in place since 1991 under Safe Home Income Plans (SHIP) and later rebranded as the Equity Release Council (ERC) in 2012. Members must adhere to its strict set of standards of conduct and practice.
Myth 2: Equity release is a last resort option.
That’s no longer true, if it ever was. The increasing flexibility of lifetime mortgages and rising property prices mean more clients are using their property wealth to fund a variety of later life needs.
According to the ERC’s Q1 2025 market report, total lending increased by 32% in Q1 2025 (£665m) compared to Q1 2024 (£504m) and this is the fourth successive quarter of growth recorded by this market.
Myth 3: It is an expensive way to borrow.
Releasing equity with a lifetime mortgage doesn’t have to be expensive. There are a variety of features available that could help clients control the costs. For example, they could release equity in stages using a drawdown facility. Or they could control the impact of interest by choosing to make optional payments. Because interest rates are fixed for life, they will always know exactly how much it might cost them.
Myth 4: Clients will leave debt to their family and loved ones.
Providing the terms and conditions are met, no debt is left to the client’s estate and they’ll never owe more than the value of their home once sold upon death or permanently moving into long-term care.
Myth 5: Equity can’t be released if there’s an outstanding mortgage.
One of the more common uses of equity release is to pay off an existing mortgage. This can free up income previously used to service the mortgage. Using equity release to repay the outstanding mortgage could cost the client more in the long term.
For example, a customer heading into retirement with limited income and affordability can’t access a traditional mortgage, as they fail the income and affordability assessment. Because there are typically no mandatory repayments on this product, along with the other consumer protections like lifetime tenure, a customer can rest assured that this is great and reliable solution for those entering retirement.
Myth 6: It’s not possible to reduce outstanding debt.
Starting 28 March 2022, all products that meet the ERC standards have to offer the right to make penalty-free partial repayments. This means clients can make partial repayments without early repayment charges on your loan. The amount that can be repaid is usually up to a fixed amount each year.
Some products also offer fixed early repayment charges that only apply for a set time period, after this there’s no charge. And some products give the option to pay monthly interest. While this does not reduce the original loan, it helps limit how much the debt grows over time.
Myth 7: Clients will owe more than the value of their home.
Products which fully meet the ERC’s Product Standards are required to feature a “no negative equity guarantee”. This means clients will never owe more than their home is worth once it’s sold, even if this is less than the amount owed. This applies upon death or permanently moving into long-term care. The guarantee only applies when clients meet the product’s terms and conditions.
Myth 8: Clients will lose ownership and control of the property.
Clients retain full legal ownership of their home with a lifetime mortgage, just as they would with a traditional residential mortgage. The property remains theirs for life, as long as they live there and meet the terms of the loan.
When it comes to joint borrowers, the loan is only repaid when both applicants pass away or move into long-term care. Until then, they have the right to stay in their home for as long as they choose. The lender does not take control or ownership, they simply hold a charge against the property, just like a standard mortgage lender would.
Myth 9: The client must stay in the same property for the rest of their life.
With most lifetime mortgages, clients can move home and transfer the loan to the new property providing it meets the lender’s terms and criteria.
Myth 10: Clients won’t be able to leave the property as an inheritance.
A lifetime mortgage is usually repaid by selling the property after the client moves into permanent long-term care or passes away. If the loan has been repaid from the sale of property, any money left over can go to their beneficiaries. Also, some product providers allow you to ringfence a portion of the home’s equity to leave as an inheritance for loved ones.
Equity release is no longer the misunderstood product it once was. With strong consumer protections, flexible repayment options and increasing client demand, it’s time we retire these outdated myths for good.
As an adviser you should help your client make an informed decision, providing them with a personalised illustration, showing exactly how much they would owe over time should they choose to release equity. The client can use this to consider different plans and whether they want to make any payments over time.
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