We’ve all seen the glossy adverts of people driving along in a new sports car, sipping Champagne on a cruise or relaxing in their new conservatory…
And it’s all down to equity release…
But what exactly is equity release and is it for you?
In short, equity release means releasing some of the value of your home to spend how you wish.
So that might be some of the luxuries listed above, or it might be something more practical, like helping your children to buy a house, paying towards your children’s or grand-children’s education or having more money for your retirement.
There are two ways of doing it. Firstly, there is something called a home reversion scheme, where you sell a share of your property to a specialist company to generate some money for you. These schemes are usually only available to people over 65 and it is worth remembering that companies will not give you the full market value for the share they buy.
Far more common are lifetime mortgages, which are available to anyone aged over 55. These involve using your home as security against a new loan.
The benefits are that you get money to spend, you stay in your home and don’t have to pay off the loan or its interest until you die or go into long-term care and the property is sold. Most products also protect you against negative equity, so you will never end up with a debt if your property value falls.
The disadvantages are that rates of interest on these lifetime mortgages can be higher than other mortgages and of course the value left in your property as an inheritance will be lower once the mortgage and interest are paid.
Equity release isn’t for everyone and it is certainly worth getting plenty of advice before you decide to go for it.
But for those people who find themselves cash poor but equity rich, it can be an excellent solution.
Call me to discuss it in more detail.