Equity release has changed over the years, and so have the myths behind it, which is why at Bower Home Finance we’ve put together the most common myths surrounding equity release and the realities of equity release plans in 2025.
The history of equity release myths
Equity release once carried a negative reputation due to its early history in the 1980s, when unregulated products and poor, often unqualified advice led many borrowers into financial hardship. Rising interest rates, fixed annuities, and falling house prices in the early 1990s left some homeowners in negative equity and unable to move or repay debts, reinforcing the perception that equity release was inflexible and expensive.
However, the industry has undergone significant transformation since then. In 1990, the Safe Home Income Plans (SHIP) were introduced to bring in stricter rules and consumer protections. Building on this foundation, the Equity Release Council was established in 2012 with guarantees and safeguards for consumers and has been recommended by industry experts such as Martin Lewis. Today, it represents over 180 firms and more than 500 individuals, all committed to maintaining high standards and safeguarding consumer interests.
Regulation also improved. In 2004, lifetime mortgages became regulated by the Financial Services Authority (FSA) and home reversion plans followed, becoming regulated in 2007. This responsibility transitioned to the Financial Conduct Authority (FCA) in 2013, which now oversees the conduct businesses across the UK to ensure fair, honest, and effective practices that protect consumers.
Busting equity release myths
We have listed the top 10 myths surrounding releasing equity from your home and how this differs from the reality of the current equity release plans available on the market.
It’s important to note that equity release is not just a last resort option for those in financial difficulty; it can also be a proactive financial planning tool for later-life needs such as boosting retirement income and funding home improvements.
1. I will leave my family in debt if I take out equity release
One of the most common misconceptions surround equity release is that homeowners who take out a lifetime mortgage will leave their family in debt if the interest compounds and totals to more than the property’s value.
Whilst this may have been the case when equity release was first introduced, the industry has come a long way since then. With equity release now highly regulated by the Financial Conduct Authority (FCA), you can move forward with confidence every step of the way, and with your personalised illustration, the risks and your personalised recommendation will be discussed and reported in detail.
The Equity Release Council, an industry body that promotes safe equity release across the UK, also has a No Negative Equity Guarantee. This means if a member of the Equity Release Council provides your plan, you will never owe more than your home is worth. This means you can move forward with peace of mind, knowing your loved ones will not be left in debt from your equity release plan.
Learn more about the safeguards of equity release.
2. I can’t leave inheritance with equity release
Some equity release plans now come with an inheritance protection guarantee, meaning you can still leave an inheritance for your family by ring-fencing part of your property that will not be touched. Some product providers offer these options specifically to help homeowners protect a fixed percentage of their home’s value for their beneficiaries.
Learn more about leaving inheritance for your family with equity release, and planning ahead for inheritance tax.
3. I will lose my home and have to move house
All equity release plans provided by Equity Release Council members come with the right to remain in your home rent-free for life, provided it remains your main residence. This means you will never lose ownership of your home as long as you remain in your property and adhere to the lenders contract.
It’s important to note, with a lifetime mortgage you will still own 100% of your property and if you adhere to the contract with your lender, you will not need to move out. If you do not adhere to your contract, you may be forced to re-pay the loan resulting in the sale of your home.
Read more about the safeguards of equity release.
4. Equity release is not regulated and is a risky decision
Today, the Financial Conduct Authority regulates all equity release plans.
On top of this, Equity Release Council approved plans come with a set of guarantees that act to protect your financial future. Bower only recommend ERC plans or those which offer the same set of guarantees.
5. I’ll have to make monthly repayments towards my equity release plan
With a lifetime mortgage, you do not need to make any monthly repayments as there are no affordability assessments. This means you are not obliged to make payments throughout the lifetime of your loan, however it’s important to note the interest will continue to accrue until the plan ends when you pass away or move into long-term care.
However, you can choose to make payments towards the interest of your lifetime mortgage with the equity release council’s guarantee to allow customers to make penalty-free partial repayments, as part of their consumer protections.
You can decide whether you repay all, some, or none of the interest over the life of your plan, however it’s important to discuss this with your equity release adviser so you understand if any early repayment charges will be involved. Some plans offer flexibility, allowing you to pay off the interest monthly, make ad hoc payments, or even partial repayments, helping you manage the amount owed and reduce interest buildup.
If you do choose to make payments towards your lifetime mortgage, the amount that will need to be repaid will be reduced. When you pass away or move into long-term care, your property will be sold to repay the original sum borrowed, plus any interest that has accrued.
6. I can’t move house with an equity release plan
As part of the Equity Release Council’s standards, you must be allowed the opportunity to move to a suitable alternative property and transfer your lifetime mortgage (subject to the lending criteria at the time of moving).
This means many plans are portable and you can take your plan to a new property, provided the new property meets the lender’s criteria. This means you may still be able to move home after taking out an equity release plan, offering you some flexibility in the future.
7. You can only do equity release once
A common myth about equity release is that it can only be done once. In reality, it may be possible to remortgage your existing plan, either to access more funds or to secure a better interest rate, provided you meet the lender’s criteria. This allows greater flexibility and the opportunity to adapt your plan as your needs or circumstances change.
In addition to re-mortgaging your existing plan, some plans also allow you to use a “further advance.” This allows you complete further borrowing with your existing lender if your home value has increased or there is room for further funds to be released from the existing equity in your home.
8. Equity release will leave my partner without a home after I pass away or move into long-term care
Another common myth surrounding equity release is that equity release could leave their partner without a home if they pass away or move into long-term care. In reality, if the plan is taken out jointly, the surviving partner has the right to remain in the property for life or until they also move into care. Modern equity release products, particularly those from Equity Release Council members, include strong protections to ensure both partners are fully safeguarded.
All risks and implications of equity release is discussed with your equity release adviser prior to taking out the plan and will be outlined in your personalised illustration.
Read more about what happens to equity release when you pass away or move into long-term care.
9. I won’t own my home with equity release
Some people believe that equity release means giving up ownership of your home, but that’s not always the case. This depends entirely on the type of plan you choose to proceed with.
A lifetime mortgage allows you to retain full ownership of your home and acts as a loan secured against your property. On the other hand, a home reversion plan involves selling part or all of your property to a provider, while still allowing you to live there rent-free for the rest of your life.
10. You can’t do equity release with an existing mortgage
It’s a common misconception that having an existing mortgage means you can’t take out an equity release plan. In reality, many homeowners are still eligible, depending on the size of their outstanding mortgage and the type of loan they hold.
If approved, the equity release provider will require that the existing mortgage be paid off using a portion of the funds released, with any remaining money available for you to use as you choose.
Do you need equity release advice?
Yes, in order to proceed with equity release you need advice from a qualified adviser. Getting the right financial advice is essential when exploring equity release. A qualified equity release adviser can guide you through the different equity release products, explain the pros and cons, and help you decide if releasing equity is the best option for your needs.
They can also discuss alternatives, such as retirement interest only mortgages or traditional mortgage options, to ensure you make a fully informed decision. Always choose an adviser who follows Equity Release Council standards, as this guarantees they adhere to strict industry guidelines and put your interests first. Expert financial advice will help you understand the impact on your property, interest, and inheritance, so you can release equity with confidence.
Learn more about why you need advice to take out an equity release plan
Independent equity release advice at Bower Home Finance
If you’d like to discuss your equity release options, we offer free initial consultations to help you explore what’s best for you without the pressure. Get started today and find out how much you could release from your home, using our free online equity release calculator.
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