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Is equity release safe?

The safeguards and regulations that protect your borrowing.

How safe is it to release equity from your property and how are you protected?

For many homeowners aged 55 or over, equity release can be a good option to release funds for home improvement, to give financial help to family, or to supplement income. But deciding to take out equity release is a big decision, and you need to be sure that you're fully protected against any potential issues so that you feel comfortable with your plans. We take a closer look at whether equity release is a safe option.

How safe is equity release?

Equity release is safe because plans are regulated by the Financial Conduct Authority and lenders are governed by the Equity Release Council.

When you take out a lifetime mortgage, you'll always own your own home, so you'll be able to stay there until you die or go into long-term care (or your partner does, if you're both on the plan).

Lifetime mortgages also come with a guarantee against negative equity, so your family will never have to repay more than the value of your property when it is sold following death or entry into long-term care.

How has equity release been made safe?

The industry is regulated by the Financial Conduct Authority (FCA), the UK's financial services watchdog. This means all equity release lenders, brokers and advisers must:

  • Have permission from the FCA to give equity release advice or lend money
  • Follow FCA rules and guidance as set out in the FCA Handbook
  • Have adequate protections in place for consumers

Since 1991, the industry has been overseen by its own governing body, The Equity Release Council (ERC), formerly known as Safe House Income Plans (SHIP). All members agree to abide by the council rules, and 90% of the equity release sector are members of the ERC.

ERC product standards have some strict rules designed to protect consumers and keep you financially safe:

  • All products must be sold with a ‘no negative equity’ guarantee so that you never owe more than your home is worth or leave any debt to your beneficiaries.
  • You can stay in your home for life or until you go into long-term care, with no threats of repossession, provided the property remains your main residence and you abide by the terms and conditions.
  • All products must have a fixed or capped interest rate for the life of the loan, to protect you against interest rate rises.
  • You have the right to move your plan to another property providing it meets lending criteria.
  • You have the option to make penalty-free partial loan repayments.

Saga Equity Release and HUB Financial Solutions Limited are both members of the Equity Release Council. As members of the council, both Saga and HUB Financial Solutions Limited follow its strict Statement of Principles that protects customers at every stage of the equity release journey.

Find out more about Saga Equity Release

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What are the downsides of equity release?

There are some things to consider carefully before deciding that equity release is the right option for you.

It will need to be repaid, and this will affect the amount of inheritance you can leave to your family after your death. If you choose not to make full interest repayments on the loan, the compounded interest will build up and the total amount to be repaid will be higher.

When you take out equity release your entitlement to some means-tested state benefits might be affected. As part of the Saga Equity Release service provided by HUB Financial Solutions Ltd, a qualified adviser will complete a free state benefit check as part of their overall review. You'll be advised if equity release could affect any benefits you currently receive.

Some plans do have higher early repayment charges than others, so if your plans change and you want to repay some or all of your equity release early, you need to be aware of what the impact would be.

How do I take out equity release safely?

Equity release is a safe option because of the amount of regulation and protection that the industry offers, but to make sure you feel secure in making a choice you can follow these simple tips:

  • Use an accredited provider – make sure they are a member of the Equity Release Council.
  • Choose the right equity release product that suits your circumstances.
  • Understand how taking out equity release will affect the inheritance you expect to leave to your family.
  • Make sure you or your adviser checks your benefits situation to make sure that you're receiving all the benefits you're entitled to and that you won't lose out by taking out equity release.
  • Consider taking the equity release funds in stages, drawing down only when you need them so that you can minimise interest costs. You can also consider paying off the interest as you go, rather than letting it accumulate.
  • Make sure you are aware of all the alternatives to equity release to make sure it's the right choice for you.

Here and ready when you are

Whether you have questions about equity release or just want to find out more, the expert team are on hand to help.

0800 096 1483
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  • Friday: 9am-5:30pm
  • (except bank holidays)
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More on equity release

For more information and to help you understand equity release a little better visit some of our other articles and pages.