Is equity release a good idea?

Whether equity release is a good idea depends entirely on your specific circumstances. Below, George has weighed out the advantages and considerations to help you determine whether it’s the right option for you.

Advantages:

  1. You release money otherwise held up in your home.
  2. You can remain living in your home.
  3. There are no requirements to make any payments until you pass away or enter long-term care.
  4. You can choose to pay off the loan early.
  5. Inheritance tax liability might be reduced.

Considerations:

  1. If you decide to pay all or part of the loan early, there may be an early repayment charge.
  2. Releasing your equity will reduce the value of your estate.
  3. Releasing equity can impact your current and future eligibility for means-tested benefits.
  4. Unless your estate has other means to clear the amount owed, you won’t be able to pass on the total worth of your property as an inheritance. In a circumstance where you pass away, your property will be sold to pay off the lifetime mortgage or provide the reversion company with their entitled share of the proceeds.
  5. You can’t take any other loans out against your home after you release equity. With a lifetime mortgage, however, there may be opportunities for further advances.
  6. If you have chosen the lifetime mortgage option, you run the risk of owing far more than you borrowed due to the effect of compounding interest. In a circumstance where you don’t make regular repayments before you pass away, the owed amount will no longer affect you. However, it will reduce the amount of inheritance you leave behind for your beneficiaries.
Business man whos providing advice on releasing equity
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