Equity release companies to avoid in 2022

Equity release companies to avoid in 2022 main image

If you are considering releasing equity from your home, you will want to choose a company that is safe and reputable. Being aware of the warning signs will help you know which providers are trustworthy and which equity release companies you should avoid.

Chosen wisely with the help of specialist impartial advice, equity release could boost your income, making life that bit easier financially. But with its previous bad reputation and horror stories of families being left in debt, how do you know which equity release company you can trust?

So which equity release companies should I avoid?

The equity release companies you should avoid are ones that are not authorised by the FCA or members of the ERC. These two regulatory bodies ensure providers adhere to their rules and safeguards, created to offer customers complete protection.

Top 5 tips for choosing the best equity release company

  1. Choose a company that is FCA authorised
  2. Avoid companies that are not members of the Equity Release Council
  3. Seek independent specialist advice
  4. Compare providers
  5. Read company reviews
To compare plans & where to find advice click here

Equity release horror stories

The good news is that with tight regulation, the equity release horror stories of yesterday tend to be a thing of the past. Previously, when someone released equity from their home, their family could be left owing if the debt were greater than the property value when it came time to repay the loan.

However, with the control of the Equity Release Council and the regulation of the Financial Conduct Authority, it is impossible for a family to inherit debt.

If you are weighing up the pros and cons of equity release, you should be aware of any redemption penalties if you want to repay the loan. A lifetime mortgage is designed for life and only repaid once you die or move into long-term care. Having said that, lifetime mortgages these days are quite flexible and include various repayment options, so it’s all about getting the best advice.

4 little known truths about equity release

There are a lot of myths floating around about equity release that may scare some homeowners off. An increasing number of over 55s however are becoming more aware of value of the equity tied up in their home and the part that tax free cash could play in later life.

The following 4 little known truths about equity release dispel some of those myths, helping you make a more informed decision on whether using the money from your property this way could be a good option for you.

Little known truth number 1 - You can leave an inheritance for family

As the loan and the interest are repaid by the sale of your home once you die or move into long term care, equity release will impact your family’s inheritance. Some equity release schemes give you the option to protect a percentage of your property, so you can release equity and guarantee your family will still receive an inheritance.

Little known truth number 2 - You can make repayments to reduce the loan

With a lifetime mortgage you don’t have to make monthly repayments as the loan is repaid from the sale of your property. However, if you want to reduce the size of the loan, there is flexibility to do so either on a monthly or adhoc basis. You just need to choose a plan that fits your requirements, which is why seeking specialist advice is so important.

Little known truth number 3 - You still have the flexibility to move

Any equity release company that is a member of the Equity Release Council must abide by their rules and safeguards, which include the right to move to another property. The only condition being that your provider is happy with the property you wish to move to.

Some plans also offer downsizing protection which allows you to pay off some of your loan without penalty if you move to a lower value property.

Little known truth number 4 - Your family won’t be left in debt

One of the stand out rules of the ERC’s safeguards is the ‘no negative equity’ guarantee, applicable to all of its members. To ensure there’s no repeat of the equity release horror stories of old, this guarantee means that neither your family or estate will be liable if there are insufficient funds to repay the loan once your home is sold.

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