If you’re retired and you’re concerned about the ever-increasing cost of living, then equity release might be the solution you’ve been looking for.
If you’re wondering how equity release works, we’ve created this simple guide along with the pros and cons so you know what your choices are.
What is equity release?
Equity release provides homeowners with a sum of money or an income in exchange for part of the value of their home. It is only available for people over 55.
Why do people choose equity release?
There are a number of reasons why people may opt to release equity from their home. Currently, we’re seeing spiralling living costs, and whilst people may be asset rich, they could be cash poor and equity release can provide that buffer.
In addition, the money released can also be used to help relatives, like children and grandchildren get on the property ladder through gifting.
Equally, people can choose to release equity to make alterations to their home or to simply go on holiday!
The pros of equity release
Perhaps the most obvious benefit of equity release is that it provides homeowners with access to a sum of cash without having to sell their homes. As property prices continue to increase, the amount of money that can be released also increases.
Many equity release lifetime mortgage agreements are signed with a No Negative Equity clause. This means that the total sum owed will never amount to more than the house is worth, so homeowners can rest assured that neither they nor their beneficiaries will be out of pocket if the house is sold.
Equity release is a great way of providing financial freedom without having to leave a much-beloved home.
The cons of equity release
When you choose equity release you should be aware that it doesn’t pay the full market value for the property. If you are looking to release a large sum of money and aren’t too bothered about moving, then putting your house on the open market would be more beneficial.
Equity release will reduce the amount of inheritance your beneficiaries could receive. Equity release is a loan that will be paid back using the funds from your estate.
Lifetime mortgage agreements incur fees for professional services that can run into the thousands. If you’re only planning on taking out a few thousand, most of this sum could be eaten up by legal fees.
*Collaborative post*
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