Is equity release a good idea?

Is equity release the right choice for you?

Whilst life expectancy in recent years has steadily increased and people are paying more into their pensions, many overlook their home when it comes to planning their retirement. With property values worth significantly more than they were a few years ago, your home might not just be your haven; it could be your largest untapped investment.

Understanding equity release and lifetime mortgages

Equity release, particularly through lifetime mortgages, offers a way to access the wealth tied up in your home without selling it. It's a financial option that could transform your property into a source of cash, enhancing your retirement years.

Am I protected if I take equity release?

You may recall that in the 1980’s equity release had a bad name and there were some horror stories mainly around negative equity, however, these days all plans come with a no-negative equity guarantee.

And of course, equity release is tightly regulated by the Financial Conduct Authority (FCA) and overseen by the Equity Release Council (ERC), so you are protected by their rules and safeguards. You can only proceed with equity release through a qualified adviser, ensuring it matches your needs.

What does equity release cost?

The costs vary, but are similar to standard mortgages. They include arrangement and solicitor fees and usually only payable once your loan has completed – you can choose to have the costs deducted from the cash sum if you prefer. Interest is compounded and rolls up every year and is typically repaid only when the last borrower passes away or moves into long-term care.

Can I move house?

Absolutely. A lifetime mortgage is transferable to a new property, subject to lender approval. This flexibility ensures that your life’s changes don’t impact the benefits of your equity release plan.

Impact on inheritance

Equity release does affect inheritance, but it could also provide an opportunity to offer your children a 'living inheritance.' Meaning that you could use equity release to give your children part of their inheritance today, without altering your lifestyle or selling your home.

Is equity release worth considering?

Equity release is potentially worth it if you are over 55, own your home and would like a more comfortable retirement.

Before going ahead it’s important to speak to a specialist to fully understand the process and the impact it will have on you and your family’s inheritance. You can then make an informed decision on whether it’s right for you.

Every situation is unique, and equity release might not be suitable for everyone. Here are a few questions our expert, Ashley Shepherd thinks you should ask yourself:

1. What are my financial needs?
2. What are my plans for later life?
3. Have I considered other options?
4. How will it affect my family?
5. Am I happy with the costs?
6. Will it improve my lifestyle?

You should also be aware that if you receive state benefits, for example, universal and or pension credit, that equity release may not be a good idea as it could affect your entitlements.

So, is equity release a good idea for me?

If you need a cash injection and would benefit from having access to the money tied up in your home, then equity release could be a good idea. However, equity release is a lifetime commitment, so before going ahead it’s important to speak to a specialist to fully understand the process and the impact it will have on you and your family’s inheritance.