Busting the Biggest Equity Release Myths in 2025

What is Equity Release?

Equity release allows homeowners aged 55 and over to access some of the money tied up in their property without having to sell or move out.

The most common type is a lifetime mortgage, which works like this:

•  You borrow money secured against your home while retaining full ownership.
•  The loan and any interest are repaid when you die or move into long-term care.
•  The property is sold at that point, and the proceeds are used to clear the balance.

Some people choose a home reversion plan, where you sell part (or all) of your home to a provider in return for a lump sum. However, these are far less common today, with lifetime mortgages making up over 99% of equity release products (ERC, 2024).

Modern Flexibility in Equity Release Plans

Today’s equity release products are far more flexible than those of the past. Options include:

· Drawdown facilities – release funds in stages, reducing interest build-up.

· Voluntary repayments – repay some interest or capital to control the balance.

· Downsizing protection – move home later without penalty if your new property meets lender criteria.

Common Equity Release Myths – Debunked

Myth 1: “I’ll lose ownership of my home”

This is one of the biggest worries people have. With a lifetime mortgage, you remain the legal owner of your home. The lender simply places a charge on your property, much like a standard mortgage.

Only in the case of a home reversion plan would you give up part ownership – but even then, you still have the right to live in your home for life.

Myth 2: “My family will inherit nothing”

Equity release doesn’t mean leaving your loved ones with nothing. Modern safeguards protect inheritance:

• The no negative equity guarantee ensures you’ll never owe more than your home is worth.
• Many plans allow you to ring-fence a portion of your property’s value for beneficiaries.
• You can make voluntary repayments to reduce the loan and preserve more of your estate.

✅ Example: Mr and Mrs Taylor released £80,000 to help their daughter buy her first home. They also reserved 30% of their property’s value as an inheritance guarantee, ensuring their family would benefit regardless of future house prices.

Myth 3: “It’s too expensive”

This myth stems from the past when interest rates often exceeded 10%. Today, average equity release rates are between 5–7% (Moneyfacts, 2025).

What’s more, many plans allow:

• Partial repayments to reduce the interest roll-up.
• Flexible drawdown, so you only pay interest on funds you actually use.
• Fixed early repayment charges, offering more financial certainty.

Equity release is still more expensive than a standard mortgage, but it is no longer the “last resort” product it once was.

Myth 4: “It’s only for people in financial trouble”

Equity release is not just for those struggling. Many retirees use it as part of their financial planning to:

• Boost retirement income.
• Pay off an existing mortgage.
• Fund home improvements or adapt their property.
• Help children or grandchildren onto the housing ladder.
• Enjoy holidays or major purchases.

It’s increasingly a lifestyle choice, not just an emergency option.

Myth 5: “I can’t move house if I take equity release”

Most modern plans are portable, meaning you can transfer your equity release to a new property, as long as it meets the lender’s requirements. This provides flexibility if you decide to downsize later in life.

Myth 6: “It’s unregulated and risky”

Equity release products of the 1980s and 1990s earned a poor reputation due to weak regulation. Today, that has completely changed:

• All equity release plans are regulated by the Financial Conduct Authority (FCA).
• Equity Release Council members must provide safeguards, including the no negative equity guarantee.
• You must take independent financial advice before proceeding.

This means modern equity release is far safer and more transparent than in the past.

The No Negative Equity Guarantee

One of the most reassuring protections for homeowners is the no negative equity guarantee. This ensures that you or your heirs will never owe more than the value of your home, even if property prices fall.

It removes one of the biggest fears people have about equity release and provides peace of mind for families.

Pros and Cons of Equity Release

While myths often exaggerate risks, equity release does have both benefits and drawbacks.

Benefits for Retirees

• Access to tax-free cash without selling your home.
• No compulsory monthly repayments.
• Stay in your own home for life or until long-term care.
• Flexible options to suit different retirement needs.

Potential Drawbacks

• Interest compounds over time, reducing inheritance.
• Early repayment charges may apply if you want to repay early.
• Possible impact on means-tested benefits.
• Reduced estate value compared to leaving your home debt-free

Alternatives to Equity Release

Before committing, it’s worth exploring other ways to unlock cash:

• Downsizing – Selling your home and moving to a smaller property releases equity without taking on debt, but it can mean leaving a familiar community.
• Retirement Interest-Only Mortgages (RIOs) – You pay the interest each month, so the balance doesn’t grow.
• Using pensions or investments – accessing savings or investments may be more cost-effective than borrowing.

Tips for Navigating Equity Release Decisions

To make the right choice, follow these steps:

1. Speak to an FCA-Regulated Adviser – Advice is mandatory and ensures suitability.
2. Involve Your Family – Transparency helps avoid future conflict about inheritance.
3. Compare Providers and Products – Not all plans are equal; shop around for rates, flexibility, and protections.

FAQs About Equity Release Myths

Is equity release safe in the UK?

Yes. Equity release is FCA-regulated and ERC-approved, with strong consumer protections.

Can I pay off equity release early?

Yes. Some plans allow penalty-free repayments, though others include early repayment charges.

What happens if I go into long-term care?

Your home is sold, and the loan is repaid from the proceeds. If you’re part of a couple, the surviving partner usually remains in the property.

How much equity can I release?

It depends on your age, health, and property value. Generally, the older you are, the more you can release.

Will equity release affect my pension?

It won’t affect your basic State Pension but may reduce eligibility for means-tested benefits such as Pension Credit.

How do I know if it’s right for me?

If you want to stay in your home, need extra income, and have limited alternatives, equity release could be suitable – but professional advice is essential.

Conclusion: Dispelling Equity Release Myths for Good

Equity release has come a long way from the risky, poorly regulated products of the past. Today, it is a safe, flexible, and regulated option that allows retirees to unlock property wealth while remaining in their homes.

By busting myths and focusing on the facts, it’s clear that equity release can provide financial freedom in retirement – but it isn’t right for everyone. With professional advice, family involvement, and careful comparison, you can decide whether it’s the right path for you.

👉 Contact Leaf Financial today for a free, no-obligation chat with one of our qualified advisers. We’ll help you explore your options and cut through the myths once and for all.