Let’s bust those myths!
Equity release can be a great choice for some homeowners over the age of 55 to borrow money – but it’s gained a reputation due to unregulated lending that happened in the 80s and 90s. This has led to many misunderstandings about how equity release may affect individuals in the modern world, yet today’s products are significantly different from what was available in the past. Let’s debunk some of the common myths of equity release to help you make an educated decision about your financial future.
There are two types of equity release options: home reversion or a lifetime mortgage.
For the purposes of these myths, we are talking about a lifetime mortgage. A lifetime mortgage is a long-term loan secured on your home that allows you to release a tax-free cash lump sum. Unlike a standard residential mortgage, you don’t have to make monthly repayments; instead the interest builds up on the loan each year. Interest is charged on the total borrowing and any interest previously added, which quickly increases the amount owed.
The loan and interest are repaid in full, usually from the sale of your home when you die or need long-term care, subject to terms and conditions. Your eligibility for means-tested benefits and tax position may be affected.
Script from Aviva.