Martin Lewis believes equity release could be worth considering if you want to access money tied up in your home but advises caution. A lifetime mortgage from an Equity Release Council member is a secure way to boost your money without making monthly repayments, however there are consequences to consider.
So what does the Money Saving Expert really think of equity release, what should we be aware of and are there any alternatives.
Who is Martin Lewis?
Martin Lewis, journalist, tv and radio presenter is famous for saving money. Founder of UK consumer website Money Saving Expert, he has his own TV show and regularly appears on ‘This Morning’ and ‘Good Morning Britain’. A successful campaigner, Lewis has driven change with banks, PPI and council tax.
To find out how much cash you could release try the calculator
What does Martin Lewis say about equity release?
Money Saving Expert Martin Lewis explains how equity release lets you unlock the value of your property, giving you a cash lump sum. He details how home reversion plans and lifetime mortgages work and that the loan plus interest is only repaid once you die and your property is sold.
He highlights some of the different lifetime mortgages available and how you can now choose to repay some of the interest, or just drawdown the money you need and leave the rest in reserve.
The Money Saving Expert guide highlights the cost of equity release, advising that although interest rates have dropped, they are still significantly higher compared to standard mortgages. Also, as it’s compound interest, the size of the loan grows much quicker and will therefore impact any inheritance you wanted to leave.
Is downsizing an alternative option to equity release
One of the main points Martin Lewis makes in his guide to releasing equity is to consider downsizing first. Downsizing to a smaller property may provide the excess cash you need, as well as giving you the opportunity to find a property that is more suitable to later life, for example with fewer stairs.
However, if downsizing is not cost effective because of estate agent and moving fees or means moving to another location that leaves you feeling isolated, equity release may be worth looking into.
If you are considering downsizing, Martin Lewis advises to do it sooner rather than later. In his experience, people in their 60s frequently feel they are too young to downsize. However, in later years when money becomes more of a consideration, they feel they’re then too old to move.
Money Saving Expert’s equity release top tips
Money Saving Expert provides four invaluable tips when it comes to releasing equity:
- Only borrow the amount you need
Drawdown lifetime mortgages let you keep a cash sum in reserve, so you can access the money as and when you need it. You only pay interest on the money drawdown, not the cash held in reserve, which means it’s cheaper than taking the cash in one go.
- Use a member of the Equity Release Council
The Equity Release Council works with the Government to promote safe equity release products , ensuring the security of homeowners. All ERC members abide by the ‘no negative equity guarantee’ that ensures you will never owe more than the value of your home.
- Get professional equity release advice
Use the services of either an independent mortgage broker or IFA that is qualified to sell equity release to ensure you get the best advice.
- Be aware of any impact to benefits
The cash sum you receive through releasing equity from your home can affect any benefits you may receive such as universal or pension credit. A professional equity release advisor should be able to help you with this.
More information on releasing equity from your home
Releasing equity from your home is an important decision and whilst the information Martin Lewis provides is useful, there is more you should know.
Should you equity release?
Equity release can make life easier, but it will reduce your family’s inheritance. If you are comfortable with this, in need of funds and understand the terms and conditions, then equity release maybe worth considering. Afterall, as Martin Lewis says, ‘it’s your money, so prioritise your own standard of living’.