Thanks to a lack of regulation and the media spotlight focusing on the negative side of equity release, the schemes regularly have a bad reputation and many people will not even consider them. In the late 1980s and 1990s, when the schemes first came into existence, there weren’t any guidelines and many people ended up in debt as a result. However, times are different and the Financial Services Authority now regulates life mortgage schemes and home reversion plans. Despite changing times many people still have a negative perception of equity release schemes. Here are some popular myths concerning equity release schemes:
My home will be taken off me: this should never be the case and all participants in equity release schemes should be allowed to stay in their homes or move house if they wish. Policy holders shouldn’t be forced to sell their home and they can stay in their abode until they either pass away or move into long-term care. Home reversion plans involve selling a percentage of the property, but the owner has the right to stay in their home rent-free.
My children will be forced to pay for my debt: providers should offer a no negative equity guarantee, which ensures that children or other family members will not be lumbered with any debt once the policy holder has moved into long-term care or died. Taking out an equity release plan often reduces the amount of money children receive from their parents in the form of inheritance. It is important for family members to be attentive of the situation regarding the property value.
Equity release is not safe: equity release is now safe, because the Financial Services Authority regulates it. However, although the industry is fully regulated, equity release is not always a first-rate idea and may not benefit some people. It is always advisable to seek professional help before joining an equity release scheme.
I won’t be able to move if I have an equity release plan: you should be able to move home, as long as the new property meets the criteria. There should be no additional fee for the policy holder to pay in the event of them moving to a suitable property.
Equity release is for people on a low income: in the past people on a low income were more likely to join an equity release scheme. This is no longer the case because a boost in the range of equity release products has occurred and peoples’ needs and preferences have changed.