No. The amount of money you borrow against the value of your home, plus any rolled-up interest, can never go above the value of the property – when it is sold at the end of your plan – due to theNo Negative Equity Guaranteesafeguard upheld by Equity Release Council members. You will continue benefitting from the rises in property value in the years to come.
With a lifetime mortgage, you will continue owning your home and with a home reversion plan, you would have to convey the deeds to the scheme provider – totally or up to an agreed percentage. Based on that, the scheme provider will own this part of your property. However, in both cases you will own a lifetime lease guaranteeing you the right to stay in your home until death or when you move into long-term care.
The main risk for borrowers who have traditional mortgages is that they find themselves unable to make their regular repayments – and if they get too far into debt the lender may decide to go to court to get an order to repossess the property. The lender will then sell the property to recoup as much as possible of the money which it had lent to the borrower. With most equity release schemes however, you the borrower are not required to makeanyregular repayments to the lender, so the question of not being able to afford to repay the loan simply does not apply.
It is rare for a lender to take possession under an equity release plan but as with every contract, failing to comply with the terms and conditions of an equity release plan, could mean that the house might be repossessed. For example, failing to keep the property in a good state of repair, and renting it out/ subletting a part of it are reasons why a contract could be considered breached on behalf of a borrower. We should emphasise that even if a contract is breached on the behalf of a customer, a lender would first give the borrower warning about what the borrower needed to put right.
It is true that instances of repossessions under equity release schemes have happened in previous decades when the product was unregulated. Nowadays, equity release is one of the most regulated financial products in the UK and both the regulator and the industry itself work to ensure, as much as possible, that there are no negative customer experiences. The industry aims to protect the good work that has taken place since then with regards to standards and its long-term reputation. In fact, the Equity Release Council is an organisation created exactly on this premise: to ensure your total peace of mind through their safety guarantees (please see FAQ on product standards).
