EQUITY RELEASE – IS IT RIGHTFOR YOU?

Samuel Gee of Manning Gee Investments in Bristol look at the pros and cons of releasing money from the value of your home.

There has been a huge rise in the number of people using equity release to help loved ones or fund a more comfortable retirement.

Many are now using cash tied up in their homes to help their children get a foot on the housing ladder, pay for home improvements or pay off their mortgages. Equity release lets homeowners aged 55 and over access tax-free cash from the value of their property. It can offer a lifeline for some older people who are asset rich but cash poor.

But deciding whether it’s right for you can be a complex and highly individual financial decision that needs careful consideration. Here are some advantages and disadvantages of equity release to help you weigh the pros and cons of this as a financial strategy:

Pros

• Access to cash: Equity release can provide a way to access the equity built up in your home, which can be a valuable source of income in retirement or other circumstances where you need cash.

• No need to move: Equity release allows you to stay in your home while still accessing some of its value. This can be especially valuable if you have an emotional attachment to your home or have invested significant time and money into maintaining it.

• No monthly payments: Unlike traditional mortgages, equity release does not require monthly payments, which can help reduce financial stress and provide greater flexibility in your budget.

• Tax-free cash: Funds released from an equity release mortgage are taxfree, which can provide additional financial benefits.

• Legal protections: Equity release products are subject to regulation and consumer protections, which can help safeguard your interests.

• Estate planning: Equity release can be used as part of an estate planning strategy to help transfer wealth to your beneficiaries while you are still alive.

• No negative equity: Equity release products come with a no-negative equity guarantee, which means that you will never owe more than the value of your home, even if the market value decreases. CONS

• Reduced inheritance: Equity release can reduce the value of your estate and the amount you can leave to your children or other beneficiaries.

• High costs: Equity release products can come with high fees and interest rates, which can significantly reduce the amount of cash you receive and increase the overall cost of the loan.

• Long-term commitment: Equity release is typically a long-term commitment, which means that you may not be able to sell your home or move for many years.

• Impact on benefits: Equity release payments can affect your eligibility for means-tested benefits, which could significantly impact your overall financial situation.

Opportunity cost: Equity release can be a high-cost way to access cash, and there may be other financial strategies or products that would provide better returns or benefits for your individual situation.

Independent professional advice helps give you a clear picture of your financial circumstances and what other options, if any, are available and whether equity release is right for you.

It’s also a good idea to discuss things with your family before rushing into a decision that could affect your home and your lovedones’ inheritance

For more information visit mgi.advicefront.com