Equity release is a valuable tool that allows homeowners to free cash from their homes in retirement.
However, if you are thinking about equity release, it is essential that you seek professional guidance from an adviser who can evaluate your personal circumstances, make recommendations and guide you through the process. Here are five reasons to get professional equity release advice.
1. Products Do Vary
Due to increased demand, the number of equity release products available on the market has risen. In fact, sales of equity release have doubled in the past five years.
There are two main categories: home-reversion plans and lifetime mortgages.
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2. Get the Best Value
With most equity-release products, interest rolls up, with the loan repaid once you move into long-term care or die. This compounding effect of interest can quickly grow the total owed, and the debt could eventually exceed the property’s value.
A no-negative-equity guarantee will ensure that you never owe more than your home’s value. An adviser can guide you through these products to understand the implications of your decision on your finances.
3. Save Costs
There is a range of methods available to reduce costs, including products with low charges and competitive interest rates. Other optional features can include no early repayment charges, which allows you to downsize the loan and pay it off early penalty-free, or ad-hoc interest payments that keep the total amount of debt down.
Drawdown schemes also allow you to drip-feed the equity as you require it, and interest is only charged on what you have borrowed.
4. Protect Your Inheritance
By taking out an equity-release scheme, there will be less inheritance for you to pass onto your family. Your house will be sold to repay the debt, and depending on the interest accrued, there might not be much left.
However, options are available that allow you to ring fence some of your home’s equity as a guaranteed inheritance.
5. Equity Release May Not Suit Your Needs
Advisers will consider all the options available before recommending a scheme, with other opportunities such as downsizing or remortgaging available. Using a share of your property’s wealth now could reduce your estate’s value over time and potentially affect your right to means-tested benefits.