Many people over the age of 55 find themselves to be “property rich but cash poor”; that is, they have a lot of money tied up in their house but have little cash to spend. Equity release refers to a number of products that allow people over the age of 55 to access this money (equity).
The decision to enter an equity release scheme shouldn’t be made lightly though and it is important to know all the facts first. These decisions are best made with the help of an equity release advisor so that you get the best deal for your situation. To help you make a more informed decision, we’ll highlight some of the advantages and disadvantages of equity release.
The main benefit of equity release is that it allows you to access the funds that are tied up in what is probably your biggest asset: your home. These can be released in either a lump sum or monthly payments, depending on the scheme you agree to.
The money is then yours to do with as you wish and most people use it to pay off any existing debts or to increase their monthly income. The money can also be used for things like improving your home, visiting places you’ve always wanted, or helping family members to put a deposit on a house of their own.
Although equity release forms are beneficial for some people, they can have drawbacks in some cases. The main disadvantages come from people choosing the wrong scheme, and can be alleviated with the use of an equity release advisor. Some schemes have high interest rates or charges for early payments so it is essential that you find the right equity release scheme for you before you sign.
Other disadvantages are that it will reduce the value of your estate, which may be an issue if you are thinking about passing it on to beneficiaries. Equity release may even affect your entitlement to state benefits or grants, and this should be checked before you sign anything.
There are many alternatives to equity release that you should consider when making your decision. A popular choice is to downsize your home instead. If you find that you have space going unused, downsizing will allow you to find a more suitable home while also receiving a nice lump sum.
State grants can also be used instead if you are considering equity release for home repairs or modifications.
Hopefully you are now more informed about equity release, but it is still important to have an equity release advisor to make sure you get the best deal for you. Here at Burton & Fisher, we are independent financial advisors in Lancaster and can advise you on equity release and more. For more information, don’t hesitate to contact us on 01524 416 872