This page is written for the family as much as the homeowner, because the objection almost always comes from the same place: a son or daughter who has heard something about equity release and is worried.
So let us deal with it honestly rather than defensively.
Yes, it reduces the inheritance. That is not a catch, it is the mechanism.
Equity release takes money out of a house. The money comes out now, the loan and the interest are settled when the property is sold, and whatever is left goes to the estate.
If your parents release £60,000 and the interest rolls up for fifteen years, the amount repaid from the sale will be considerably more than £60,000. That is compounding, and there is no version of this where it does not reduce what is left.
Anyone who tells you otherwise is selling something.
What is worth separating out is the difference between "this reduces the inheritance" and "this is a bad idea", because those are not the same statement.
The things that are genuinely protected
These protections are now standard on every plan we arrange.
They can never owe more than the house is worth. The no negative equity guarantee means the debt cannot outgrow the property. If the loan and interest end up exceeding the sale price, the shortfall is the lender's problem, not the family's. No debt can ever be passed on to you.
They keep the home for life. It is their property. They cannot be moved out, and nobody is going to turn up and take it. The loan is repaid when the house is sold, normally on death or a move into long term care.
The rate is fixed or capped for the life of the loan, so it cannot suddenly climb.
They can usually move house. Lifetime mortgages are generally portable, which means they may be able to transfer to a new property, subject to the lender's terms and the new property meeting its lending criteria.
They can make voluntary payments without penalty, which matters a great deal for the point below.
The bit families should actually focus on
If protecting the inheritance matters to everyone, there are levers, and most families do not know they exist.
Take less. The maximum is not a target. Releasing what is needed rather than what is available is the single biggest lever there is, because everything else compounds off that number.
Use drawdown rather than a lump sum. Take an initial amount, leave the rest in an agreed reserve, and only pay interest on what has actually been taken. For someone who wants a bit now and might want more later, this can make a substantial difference over twenty years.
Pay the interest, or some of it. This is the one families overlook. If the children can comfortably contribute towards the monthly interest, the balance stops growing, or grows far more slowly. What is being protected is their own inheritance, so it is not an unreasonable conversation to have.
Nobody is obliged to do any of that. But a family that understands these three levers usually ends up in a very different place from one that does not.
The question worth asking instead
Families often arrive at "how do we stop them doing this". It is usually more useful to ask what happens if they do not.
If the alternative is a parent turning the heating off, not repairing the roof, going without care they need, or quietly getting into debt, the inheritance is being protected at their expense. That is a real trade and it deserves saying out loud.
There is also a version where equity release is genuinely the wrong answer, and it is not rare. Downsizing may serve them better. A retirement interest only mortgage may cost less. There may be benefits they are entitled to and not claiming. Sometimes doing nothing is right.
Craig will say so when that is the case. Not everyone who comes to him asking about equity release ends up taking it, and that is a good thing. His job is not to sell equity release. It is to help you make a well informed decision about your future.
Two things worth having in place anyway
A will. Whether or not equity release goes ahead, this decides what happens to whatever is left.
A lasting power of attorney. If a parent later loses capacity without one in place, the family's options narrow sharply and sorting it out becomes slow and expensive. It matters more than most people realise, and it is far easier to do early.
Not sure how any of this applies to your own circumstances? Craig is happy to talk it through, free and with no obligation.
Come to the conversation
Craig is happy to talk to the whole family. Plenty of people bring an adult child to the first call, and it usually makes for a better decision.
There is no charge for that conversation, and our advice fee of a maximum of £1,495 is only payable if a case completes.
Book a call with Craig or call 0113 403 5584.
