A brief list of different equity horror stories

There are many equity release horror stories out there, most of which came about due to the incredible costs associated with equity release schemes.

Negative equity

Ever so often the interest charged on the equity release ould have surpassed the total value of the property and the equity release borrower will find themselves owing significantly more than their properties are worth.

The interest with the equity release products also compounds and this means you end up being charged interest on interest.

Debts that double

The way the interest rolls up on the equity release plans could also mean that you end up accumulating more interest much faster than you usually would.

Most equity release horror stories, unfortunately, bear the same foundation.

Early repayment charges

Some equity release lenders place high early repayment fees on their products to discourage equity release borrowers from using the equity release product as a short term lending facility. This, of course, means that when it comes round to paying off their equity release products (if they choose to pay the equity release off during their lifetime) they will find it incredibly very hard and expensive to pay off their equity release product.

Equity release borrowers then find themselves living a true-life horror story as they become equity release prisoners and are unable to get out of their equity release plan.

This, of course, means the equity release continues to accumulate more interest and cost them more every year.

No inheritance for your family

Being an equity release prisoner can then lead you to a much bigger horror story as you will not be able to ring-fence any equity to leave as an inheritance for your family. In some cases, the equity release will cost more than the property is worth.

As of recently, the council of equity release lenders has set new rules and stipulations which ensure that all equity release lenders follow great codes of conducts that avoid equity release borrowers from having any horror stories.

There are many alternatives to equity release schemes which you may want to consider before getting an equity release product.

If you need financial advice and you live in the UK then you could contact the Money Advice service over the phone or via chat for impartial advice.

You can also contact the debt charity “Step Change” if you are in debt and need help.

John has 22 years of experience in financial services. This spans across financial research, financial services (As a qualified mortgage broker and underwriter), financial trading and sales at global investment banks. While working as a publishing research analyst, he covered European bank credit and advised institutional clients on investment strategies at both JP Morgan and Societe Generale. John has passed all three levels of the CFA (Chartered Financial Analyst) programme.