Equity Release - Is It For You? by
Equity Release is a product which enables home owners over 55 an option to release capital tied up in property without incurring a monthly repayment to the lender. Essentially, this is lending of ‘last resort’ and all other options should be considered prior to releasing equity.
Interest rates are favourable at present but each year that passes, equity in your property is reduced by the interest added to your loan amount. Over time this can amount to a substantial amount and effectively result in having ‘sold’ your home for significantly less than the market value. Equity does not need to be released in full with the option to ‘drawdown’ funds on an instalment basis, meaning interest is only charged on the amount withdrawn protecting equity within your property. ‘Downsizing’ should always be considered and has the potential to provide surplus capital above the purchase price of a new home and can ensure a legacy for your intended beneficiaries.
The product is not for everyone and is not the simplistic solution aired daily in TV ads but it does have it’s place for the ‘asset rich, cash poor’ client under the correct circumstances. Due consideration should be given to all advantages and disadvantages as well as the individual provider’s product terms and conditions.
In our view, it is imperative to take Independent Financial Advice to ensure protection prior to making such a significant decision.