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The pros and cons of equity release

Letting a property

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Equity release helps provide homeowners with a sum of money or an income in exchange for part of the value of their home. It’s ideal for people above the age of 55 who need an injection of cash to help supplement them, but don’t want to sell their home.

Why do people choose equity release?

Whilst there are a number of reasons people choose to release equity from their home, Will Hale, CEO of Equity Release says,

Property wealth is established as a major factor in retirement planning with one in three people retiring this year looking to the money invested in their home as a way of supplementing their income.

Ultimately, people choose equity release as a way of having cash solvency so they’re able to fulfil their retirement dreams. Whether it’s renovating the home, going travelling, or gifting money to a loved one, equity release can help ease financial burden in retirement.

The pros of equity release

The most obvious benefit of equity release is that it gives homeowners access to cash, without having to sell the home. With house prices increasing in value almost annually, homeowners are able to take out some of this cash increase to help supplement retirement income, instead of leaving it all to beneficiaries.

If a lifetime mortgage with a ‘No Negative Equity’ agreement is signed, you never have to owe more than the home is worth at the time of having to go to market. This can offer a great amount of reassurance for many homeowners who choose equity release.

Many people choose equity release as a way of having extra cash in the bank, without having to sell their much-loved home.

The cons of equity release

One of the main disadvantages of equity release is that it doesn’t pay the full market value for the property. This means you’ll receive far less money than if you’d put the property on the market. It’s always worth following the news with regards to property trends.

Equity release will also reduce the amount of inheritance your beneficiaries could receive, because the equity release loan will be paid back using the funds from the estate.

If you’ve chosen a lifetime mortgage, you’ll often incur lender fees, solicitor fees and a fee paid to the equity release adviser. Charges related to equity release tend to be a few thousand pounds, so should be factored in when you’re considering how much equity you’d like to release.

If you’re considering equity release, it’s important that you speak to an independent adviser.

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