Equity Release Facts in 2022

All the Details You Need to Know About Equity Release in the UK
Contributors: Nicola Date, Katherine Read. Edited by Rachel Wait & Reviewed by Francis Hui
Don’t Get Caught Unaware! Here Are Some of the Top Equity Release Facts You Need to Know to Make Sure You Understand How Unlocking the Value of Your Property Can Boost Your Finances.

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Knowing these 2022 equity release facts will prevent you from being fooled by fiction!

More and more homeowners over the age of 55 are using equity release to unlock the cash tied into their estate every year.

However, entering into an equity release plan without the right knowledge could be detrimental to your finances.

AND, if you’re not aware of all the facts, you could miss out on golden equity release opportunities.

We’re here to help you discover:

  • Intricate details of the equity release market in 2022.
  • How to get the most from your equity release plan.
  • If releasing equity is the best way to fund retirement.
  • If equity release is safe for retirees and their families.

Through extensive market research and combing over 220 plans, we’ve put together the 5 equity release facts that you need to know.

Are you wondering what these are? Continue reading to find out now!

Know About Equity Release in 2022

Here’s what you must know about equity release in 2022.

These 15 facts will help you determine if these products are worthwhile under your circumstances.

1. You Can Make Multiple Withdrawals With Equity Release

You can make multiple withdrawals with equity release instead of just unlocking one big lump sum, should you wish to.

You can release equity in 3 ways:

2. You Can Pay Back the Interest on Your Loan

You can pay back the interest on your loan instead of letting it compound.

However,

while there is no obligation, can volunteer to pay back the monthly interest, stopping and starting whenever you wish. 

By doing so,

you decrease the amount owed when you pass away or when you need to move into permanent care and stop the interest from compounding.

Why is this good?

By reducing the amount owed on your equity release plan.

Your family will pay less from the sale of your home and, in turn, could receive a larger inheritance.

3. Most Equity Release Products Have a ‘No Negative Equity Guarantee’

Most equity release products have a ‘no negative equity guarantee

That’s set by the Equity Release Council to ensure that your family is not left with equity release debt when you pass away or move into permanent care.

In a nutshell, the guarantee ensures that any additional funds owed from your equity release will be written off if they exceed the resale value of your home.

Even if property prices plummet.

Basically, if your house is sold and the loan, plus interest, exceeds the sale price, nothing further will be owed.

If, however, there are leftover funds after the loan, plus interest, is covered, this income will go to your heirs.

The Equity Release Council is the body that regulates the equity release market.

It’s vital when looking to release equity from your home to avoid any companies that are not members of the Council.

4. You Have the Right to Stay In Your Home

You have the right to stay in your home throughout the course of your equity release plan, according to the rules of the Equity Release Council.

Isn’t that fantastic?

In other words, whether you go with a lifetime mortgage or a home reversion scheme.

You will be allowed to live in your house until you die or move into permanent care.

5. You Don’t Have to Own Your Home Outright to Be Eligible for Equity Release

You don’t have to own your home outright to be eligible for equity release.

Instead, you can still have a small remaining mortgage. However, this might reduce the amount that you can access.

In addition, most lenders will expect you to use the funds released to pay off your existing mortgage, leaving you the remaining equity to spend as you wish.

6. Equity Release in 2022 Is Regulated by a Governing Body

Equity release is regulated by a governing body called the Equity Release Council with strict rules to ensure the protection of consumers.

It’s also overseen by the Financial Conduct Authority (FCA)1

7. With a Lifetime Mortgage, You Retain 100% Of Homeownership

With a lifetime mortgage, you retain the full ownership of your property.

You get to stay in your home and continue enjoying all it has to offer: security, stability, comfort, and pride of owning a valuable asset that is increasing over time.

8. You Will Never Be in Debt More Than the Value of Your Property

You will never be in debt more than the value of your property thanks to the ‘no negative equity guarantee‘.

If you sell your home and release equity, equity release providers’ cap repayments to no more than 25% or £50,000 whichever is greater than the sale price.

9. The Cash Is Tax‑Free

The cash is tax-free with equity release and you won’t have to pay any income tax or capital gains tax2 on the money you unlock.

10. You Must Be at Least 55 Years Old to Release Equity Through Equity Release in 2022

You’ll need to be at least 55 years old to release equity through equity release in 2022.

However, there is no maximum age requirement and you can take out a lifetime mortgage from the day you buy your first property.

Even if that’s when you’re in your 50s or 60s!

11. There Is a Minimum Property Value in 2022

There is a minimum property value for equity release in 2022.

Your home must be worth at least £70,000 to release equity – but in some cases, you can still access up to 60% of the value of your estate.

12. Lenders May Take Your Health and Lifestyle Into Account

Lenders may take your health and lifestyle into account with an enhanced lifetime mortgages.

They are designed for property owners with poor health.

Homeowners who qualify for these plans will get optimal interest rates and loan-to-value. 

13. The Interest Rate Can Be Fixed for Life

Equity release interest rates are mostly fixed for life. However, some plans do come with capped variable interest rates. 

14. The Debt Won’t Be Passed On

Your equity release debt won’t be passed on to your family members.

Instead, the loan and any compound interest are covered, usually from the sale of your home, when you pass away or enter long-term care. 

15. A Solicitor of Your Choosing Will Aid with the Legal Aspects of Equity Release

A solicitor of your choice will assist you through the legal aspects of the equity release process.

Once you’ve found the equity release that suits your needs, an estate attorney will help you with the transfer and legal documentation.

Got Questions About the Equity Release Facts? Check These Out First!

Can You Lose Your House With Equity Release?

Can Equity Release be Paid Back?

Will My Children Inherit My Equity Release Debt?

Does Equity Release Affect Your Credit Score?

In Conclusion

After learning these facts, are you still wondering: “is equity release a good idea in 2022?”

The short answer is yes.

Equity release can be an excellent financial plan to provide UK residents over the age of 55 a stress-free retirement if done right.

If you or your family are considering equity release, you must think carefully, weigh up all the pros and cons, and discover the pitfalls before making your final decision!

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Editorial Note: This content has been independently collected by the SovereignBoss advisor team and is offered on a non-advised basis. Sovereignboss may earn a commission on sales made from partner links on this page, but that doesn’t affect our editors’ opinions or evaluations. Learn more about our editorial guidelines.

rachel w

Rachel Wait
Personal Finance Journalist

Rachel is an experienced finance journalist and editor with a particular interest in personal finance and consumer affairs. She has vast experience writing about money issues, property, insurance, and consumer affairs, and you’ll find her articles regularly featured in top media and newspaper publications.
John Lawson

Written by
John Lawson
Founder SovereignBoss

John is passionate about education and has made it his life-long mission to assist UK citizens on their future financial options, with a specialist interest in equity release, and SovereignBoss is the natural extension of this passion.
francis

Reviewed by
Francis Hui
Senior Risk Manager

Having held various high-level roles across the industry, Francis is truly an expert in aiding UK citizens in their financial decisions and risk analysis. His unique insight and statistical knowledge make him the perfect person to help you take your financial future to the next level.
kath icon

Katherine Read
Consumer Affairs Writer

Since joining the editorial team at SovereignBoss, Katherine has become focused on bringing transparency to finances and opportunities for those approaching retirement age. She writes on the topics of equity release, home reversion, and mortgages.
nicola

Nicola Date
Writer & Journalist

Nicola is a financial writer for SovereignBoss and is passionate about the opportunities that equity release can open up for homeowners. Her extensive business experience and deep understanding of the industry means that she’s always up-to-date with the latest developments.

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