Safeguards and Risks: What You Need to Know

The Financial Conduct Authority (FCA) is the UK’s financial services regulator, and it plays a vital role in protecting consumers who are considering equity release. All equity release advisers, lenders, and plans must be authorised and regulated by the FCA, which means they are legally required to treat customers fairly, provide clear information, and ensure that any recommendations are suitable for your needs. This regulation gives you peace of mind that the advice you receive is professional, impartial, and in your best interests.

The Equity Release Council is the UK’s industry body dedicated to safeguarding standards in the equity release market. Its primary role is to ensure that all member providers and advisers follow a strict Code of Conduct designed to protect consumers. This includes key guarantees, such as the right to remain in your home for life, the no negative equity guarantee, and the requirement that all clients receive independent legal advice before proceeding.

By choosing a provider and adviser who are members of the Equity Release Council, you can be confident that your plan meets these high standards. The Council also works to improve understanding of equity release through education and policy engagement, giving homeowners and their families greater confidence in making long-term financial decisions. When you see the ERC badge, it’s a sign that customer protection is a top priority.

One of the most important protections offered is the No Negative Equity Guarantee. This means that when your property is eventually sold — typically when you pass away or move into long-term care — neither you nor your estate will ever owe more than the value of your home. Even if property prices fall or the interest has built up over many years, any shortfall is written off by the lender. Your family will never be left with debt from your equity release plan.

This safeguard is automatically included in all plans approved by the Equity Release Council. It gives homeowners and their families peace of mind, knowing that the debt will never exceed the value of the property, and no other assets (like savings or inheritance) can be used to cover the balance. It’s a key reason why many people choose Council-approved lenders when exploring equity release.

With a lifetime mortgage you retain 1005 ownership of the property and the guaranteed right to live in your home for the rest of your life, or until you move into permanent long-term care. As long as the property remains your main residence and you meet the terms of your agreement (such as maintaining the property and keeping it insured), you cannot be forced to leave your home, no matter how long you live or how much interest accrues. If you live with a partner/spouse then, as long as you are both named on the mortgage, the loan will only need to be repaid when the second of you either dies or moves into long term care.

This guarantee offers long-term peace of mind and is a vital part of every Council-approved equity release plan. It ensures that your home remains your own, giving you full legal ownership and the freedom to enjoy it without the fear of being asked to move out. It’s a powerful reassurance, especially for those who value staying in familiar surroundings as they grow older.

The downsizing protection guarantee is an optional feature offered by some Equity Release Council-approved plans, giving you extra flexibility later in life. It allows you to repay your equity release loan in full without facing early repayment charges if you decide to move to a smaller, more suitable property — typically after five years or more. This means that if your needs change, you’re not locked into your current home or penalised for wanting to downsize.

This safeguard is particularly helpful if you want to move closer to family, reduce household costs, or adapt to health or mobility needs. Some plans may also allow you to port your equity release plan to a new property, subject to the lender’s criteria, instead of repaying it. Either way, the downsizing guarantee gives you greater control over your future living arrangements and helps you keep your options open as circumstances change.

One of the main considerations with equity release is that the loan, plus interest, is usually repaid from the eventual sale of your home. Because interest typically compounds over time, the amount you owe can grow significantly — especially if you choose not to make any repayments. This can reduce the remaining equity in your home and affect how much you’re able to leave as an inheritance. However, the No Negative Equity Guarantee, provided by all Equity Release Council-approved plans, means you’ll never owe more than the value of your property — no matter how long the loan runs or how interest rates change.

It’s also worth noting that you remain the legal owner of your home, and you’ll still benefit from any rise in its market value over time. If property prices increase, the equity left after repaying the loan could be higher than expected — helping to preserve more for your estate. Some plans also allow you to protect a portion of your home’s value as a guaranteed inheritance, giving you extra peace of mind and control over your financial legacy.

Equity release will reduce the value of your estate, which means there may be less for your loved ones to inherit. Because the loan is usually repaid from the sale of your home — along with any interest that has built up — the remaining equity can be significantly lower over time. While some plans offer inheritance protection features, it’s important to consider how releasing funds now may affect your long-term wishes and family plans.

That’s why it’s essential to speak with a qualified adviser who is registered with the Equity Release Council. They will take the time to understand your personal circumstances, explain the potential impact on your estate, and explore options that could help preserve an inheritance where possible. Regulated advice ensures that you and your family have all the facts, so any decisions are made with clarity, care, and confidence.

Releasing equity from your home can affect your eligibility for means-tested state benefits, especially if you receive income-related support such as Pension Credit, Council Tax Support, or Universal Credit. This is because the money you release is treated as capital or income, depending on how it’s used or held. For example, if you take a lump sum and keep it in savings, it could push you above the capital threshold for certain benefits, reducing or even removing your entitlement.

This is why it’s so important to get personalised advice before proceeding. A qualified equity release adviser will review your financial situation in full and help you understand how releasing funds could impact your benefits. In some cases, structuring the plan carefully — such as using a drawdown facility instead of a large lump sum — can help minimise the impact and preserve any existing entitlements.

Most equity release plans are designed to last for life, so if you choose to repay the loan early — for example, if your circumstances change or you decide to move and not port the plan — you may face early repayment charges. These charges vary between lenders and can sometimes be significant, particularly in the early years of the plan. They're in place to cover the lender’s financial loss from interest that would have been earned over time.

However, many modern plans now include more flexible features. Some lenders offer downsizing protection, which allows you to repay the loan without penalty if you move to a smaller property after a certain period (typically five years). Others may reduce or waive charges based on life events or after a set number of years. A qualified adviser will always explain the potential for early repayment charges upfront, and help you choose a plan with the flexibility that best suits your future plans.