Issues with Equity Release

Equity release schemes sound full of promise to those who want to access some of the money tied up in their value of their home without having to move because the loan, plus its interest, is repaid from the sale of your home after you pass away or move into long-term care.  But it’s not as straightforward as it might first seem and every year we see clients who regret having entered into these arrangements for the following reasons:

·         Equity release reduces the value of your estate and the amount that will go to the beneficiaries in your will. Your estate is everything you own, including money, property, possessions and investments.

·         The interest means that you effectively own an increasingly small proportion of the home as time goes by.

·         If you enter a “home reversion plan”, the reversion company owns all or a part-share of your home.

·         Getting a lump sum or taking extra cash to supplement your income may reduce your entitlement to means-tested benefits, now or in the future.

·         If you get care at home and it's funded by the local council, either fully or partially, the local council may start charging you or ask you to pay more.

Equity release is a big decision.  You should consider it very carefully and get specialist financial and legal advice.  Only choose a product from a company that's a member of the Equity Release Council because this means they meet certain standards.  Make sure your adviser and the Equity Release provider are registered with the Financial Conduct Authority (FCA).

Alternatives to equity release

Whether equity release is suitable depends on your age, health, finances, property value and long-term plans.   Always look at the other options available to you and discuss these with a specialist adviser, particularly if you need to raise cash for things like funding care in later life.

Downsize your property

You may choose to sell up and move to a smaller property.  The proceeds from the sale can then be used to meet your financial needs.  

Retirement interest-only mortgage

If you can afford to make monthly repayments, a retirement interest-only mortgage may be an option.  You pay the interest each month.  The loan is typically repaid when you sell your home, move into long term care or pass away.

Cash in other assets

You could consider using savings or cashing in any investments before taking out an equity release product.  If you’re exploring equity release due to financial difficulties, it is important to seek advice from a qualified adviser. 

Finding an equity release adviser or mortgage adviser

As a first step we would recommend that you access the Money Helper website for free, impartial guidance.  Money Helper is backed by the government, and recommends where to find further, trusted support if you need it https://www.moneyhelper.org.uk/en.

Age UK also have a good guide which we keep in stock and which you can find online. 

If you are exploring equity release due to financial challenges, PWCAC offers a full benefits check as well as help with benefits applications and budgeting.

We are OPEN for face-to-face advice (appointments and drop-ins) Monday to Friday, 9:30 – 1:30. If you need advice about welfare benefits, housing and homelessness, relationship breakdown, consumer issues or anything else, get in touch:  

info@pwadvice.org | 01892 838619 | www.pwadvice.org  | 94 Commercial Road, Paddock Wood