Is Equity Release Right For You? 3 Key Considerations

Rushing into any major financial decision is not sensible. This certainly applies to equity release, which is a way of accessing the value stored in your home without needing to sell up and downsize.

Equity release could be ideal for some people, but it definitely isn’t for everyone. Let’s look at some of the main talking points you need to know about before you make a commitment.

Do you need to plug a shortfall in your retirement savings?

Retired people can live life to the fullest by using equity release to unlock cash from their biggest asset, namely the property they own.

This is obviously appealing if you have not managed to build up enough of a pension pot to pay for the kind of living standards, experiences and treats that should really define your retirement.

Lots of people find themselves in this position, and moving to a fixed income can feel like taking a serious step back. Equity release gives you a tax-free lump sum to spend however you want to, and since you only live once and you deserve an enjoyable retired lifestyle, there’s no point holding out.

Do you want to help out a loved one?

Another of the main attractions of equity release, even if you are comfortable in your finances as a retiree, is that it enables you to give gifts to family members.

The most common example of this is to provide children with a deposit for their first home purchase, but it doesn’t have to be limited to getting your kids on the property ladder themselves.

Whatever you choose to do, the point is that equity release lets you leverage your estate right now, rather than waiting until it can be passed on as an inheritance. This means you can see the joy that your money brings to the people who are most important to you, rather than not being around to experience it.

The caveat is of course that your estate will be smaller when the time comes, because the lender will only seek repayment when your house is sold after you die or when you move into full time care towards the end of your life.

This factor can put some people off equity release deals, although the upside of getting to spend your money right now should not be overlooked. And if property prices continue to increase, you should still be able to use equity release and also leave something to loved ones in your will as well.

Do you want to improve your home?

While some people do choose to downsize after retirement, others are very happy in their homes, but would like to get work done to improve the property they already have so that it is as comfortable as possible throughout their golden years.

The steep costs of making significant improvements can be prohibitive if you are on a fixed income. Equity release lets you reinvest in your home, without needing to scrimp, save or make sacrifices elsewhere to afford it.

Again, it’s about finding the right balance according to your financial status. If you don’t have significant savings, or you’d simply rather not wait around to accumulate them over time, equity release is the fast, straightforward way to overcome this.

Sure, your loan will accumulate interest that is taken at the time of repayment, but there are no monthly fees to worry about, and so equity release relieves you of financial burdens right now. Seeking the aid of a qualified financial adviser is wise before you decide, of course.

Written by Julie Hanson

Julie is passionate about property – development, investment and portfolio planning. Along with husband Alec, Julie is actively building a property portfolio while helping others to do the same.

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