Equity release is becoming an increasingly popular financial solution for older homeowners looking to access the value locked in their property without having to sell their home. It provides a way to unlock a lump sum or draw regular income from the property’s equity, which can be used for anything from home improvements to supplementing retirement income.
But one question that many homeowners ask is: Is equity release guaranteed? In this article, we’ll explore what guarantees are in place when it comes to equity release and what you need to know before making this important financial decision.
What Does “Guaranteed” Mean in Equity Release?
When people ask whether equity release is “guaranteed,” they are often asking about a few key concerns:
- Guaranteed to get approved?
- Guaranteed to keep your home?
- Guaranteed not to owe more than the value of your home?
While no financial product can be entirely “guaranteed,” there are safeguards and protections in place that make equity release a relatively secure option when done through a reputable lender and with the help of a qualified equity release adviser.
Is Equity Release Guaranteed to Be Approved?
The simple answer is no—equity release is not guaranteed to be approved for every applicant. Approval depends on a variety of factors, including:
- Age: Most equity release products, such as lifetime mortgages, are available to homeowners aged 55 or older.
- Property Value: The value of your property will largely determine how much equity you can release. The higher the value, the more equity you may be eligible for.
- Property Type: Equity release lenders may have specific requirements regarding the type of property. For example, some might not accept leasehold properties, or they may apply restrictions to certain types of homes, such as those with non-standard construction.
If you meet these basic criteria, you’re more likely to be approved for equity release, but approval is not guaranteed. Working with an experienced equity release adviser can help ensure you apply to the most appropriate lender for your specific situation.
Are You Guaranteed to Stay in Your Home?
One of the primary concerns for those considering equity release is whether they will be able to stay in their home for the rest of their lives. This is a major benefit of equity release, especially lifetime mortgages, as you are guaranteed the right to stay in your home for as long as you live (or until you move into long-term care).
This guarantee is a core feature of products that are regulated by the Equity Release Council, the industry body that oversees equity release standards in the UK. Lenders who are members of the Council must adhere to a set of principles, including:
- Lifetime Tenure: You have the right to live in your home for the rest of your life, provided you follow the terms of the agreement (e.g., keeping up with any maintenance requirements).
- Portability: In many cases, you can move to another property if you wish, as long as the new property meets the lender’s criteria.
These protections offer peace of mind, ensuring you won’t be forced out of your home due to the equity release arrangement.
Is There a Guarantee You Won’t Owe More Than Your Home’s Value?
One of the most important guarantees offered by equity release products is the “No Negative Equity Guarantee.” This means that you will never owe more than the value of your home when it is sold. If the property’s value decreases, or if the amount borrowed plus interest exceeds the home’s eventual sale price, the lender cannot claim more than the value of the property.
For example, if your home sells for £200,000 but the total amount owed is £210,000, the lender will only claim £200,000, and the remaining debt will be written off. This safeguard is crucial in protecting you and your family from the risk of passing on debt.
The Equity Release Council requires all members to offer this guarantee, making it a standard feature of all equity release products that fall under the Council’s regulation.
What Other Guarantees or Protections Are in Place?
Equity release comes with several additional safeguards designed to protect you as a borrower. These include:
- Fixed or Capped Interest Rates: With a lifetime mortgage, you can be assured that the interest rate is either fixed for life or capped, ensuring that your debt won’t spiral out of control due to rising interest rates.
- Independent Legal Advice: Before proceeding with equity release, you are required to seek independent advice. This ensures that you fully understand the terms of the agreement and that the product is suitable for your needs.
- Regulation by the Financial Conduct Authority (FCA): Equity release products are regulated by the FCA, providing an extra layer of consumer protection. If you ever feel misled or mistreated, you have the right to make a complaint and escalate it to the Financial Ombudsman Service if necessary.
Why You Should Work with a Qualified Equity Release Adviser
Although equity release offers several guarantees and protections, it’s still a significant financial decision that shouldn’t be taken lightly. This is why it’s crucial to work with a qualified equity release adviser. Advisers can:
- Help you explore all your options, including alternatives to equity release if it’s not the best fit for you.
- Explain the terms and conditions in detail, ensuring that you understand what’s guaranteed and what isn’t.
- Match you with the best lenders, giving you access to products with favourable terms and strong consumer protections.
When seeking advice, it’s important to use an adviser who is registered with the Equity Release Council and regulated by the FCA to ensure that you are getting accurate, impartial guidance.
Conclusion: Is Equity Release Right for You?
While there are guarantees in place to protect borrowers, equity release is not a one-size-fits-all solution. Before making a decision, it’s essential to fully understand the terms, the guarantees offered, and whether this type of financial product aligns with your goals.
For homeowners considering equity release, working with a qualified adviser is the best way to ensure that you’re fully informed and protected. Our directory of expert equity release advisers can connect you with experienced professionals who can guide you through every step of the process.
