Is equity release safe?


Applying for equity release can be a daunting step for many, which is why Freedom Advice offers unbiased and informed advice on the best steps to take regarding taking out an equity release loan.


As taking out an equity release plan can be such a big step, it’s important to understand the risks just as much as the rewards.


With that fact in mind, let’s take a look through some of the safeguards regarding the equity release process.


Equity release plans are regulated


The Financial Conduct Authority (FCA) regulates all equity release plans, which means that lenders, brokers, and advisers must adhere to the FCA when lending money through equity release plans.


Even those giving equity release advice must adhere to the FCA and follow its strict codes of conduct.


This means that anyone taking out an equity release loan will be protected by regulations set out by the FCA.


The is a special council to regulate the equity release industry


The Equity Release Council (ERC) is the governing body of the equity release industry and sets out a strict code of conduct that all members must follow.


These rules are designed to protect consumers and ensure that:


  • Consumers receive financial and legal advice.
  • That consumers are able to stay in their home for life.
  • That products have a “no negative equity guarantee”.
  • That each consumer has at least one face-to-face meeting with an independent solicitor.
  • If you are currently researching a broker or a lender, you must ensure that they are a member of the ERC.
  • You must receive financial advice before accepting an equity release loan
  • As stated by the ERC, you cannot receive an equity release plan without having received financial advice from a qualified professional.
  • You must speak with an independent solicitor
  • To receive an equity release loan, you must seek the advice of an independent solicitor during the equity release process.
  • A solicitor will not give you financial advice, but they will ensure that your paperwork is in order and that the process runs as smoothly as possible.


An equity release plan should provide you with flexibility


Equity release plans are designed to last a lifetime, which means that as the years pass, the market evolves and changes. With this in mind, safeguards and flexible features should be built into any equity release plan, such as:


  • The option of a compassionate repayment charge that allows for penalty-free repayment if your circumstances change.
  • The ability to make ad-hoc voluntary payments.
  • Downsizing protection to ensure that you can repay your equity release if you move home after five years from the start of the plan.
  • Plans with fixed interest rates for life.
  • You must understand the downsides of an equity release loan
  • Although equity release is a viable way to borrow money for many, you should be aware that there are pitfalls to taking out such a loan.
  • Equity release will always reduce the estate that you pass to family members and loved ones upon your death.


There are, however, ways to minimise inheritance loss, which can be built into the plan that you take out with a lender.


Freedom Advice has decades’ of experience in helping people successfully apply for equity release plans, and we can help you minimise the cost of a plan so that you can pass on as much as your estate as possible to your loved ones.


Frequently Asked Questions