Across the UK, equity release is become a more so popular topic and way of releasing cash. But there is still confusion around what it is and how it can benefit others. This blog intends to look at everything to do with equity release and how it may affect you.
What Is Equity Release
You may have seen or heard about equity release within the news. But what really is it? Basically, equity release is letting you gain access to cash that is tied up within your home. There are a range of different products that you could use if you want to release equity and if you are over the age of fifty-five. If you were to decide to proceed with equity release, you could either access it in small amount, in one lump sum or a combination of both.
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Why is it a popular choice?
Over time, using equity release has become a more popular choice. According to the latest statistics from the Equity Release has revealed that in the first quarter of 2019, around £936 million was unlocked and accessed in the UK. This is an increase of around 8% from Q4 in 2018. In the first quarter of 2019, there were just short of 20,400 customers helped to gain access to their equity release.
Most choose to release equity due to the many benefits that come with the service. These can be found in the next section (‘Pro’s and Con’s).
Pros and Cons
Obviously, like with most things, there are advantages and disadvantages. Here are our top three advantages and disadvantages to using equity release.
- You don’t have to move house – using equity release can be seen as an alternative to downsizing. However, if you release equity, you can stay within your own home.
- Monthly outgoings – generally, you don’t have to repay the money unlocked or interest until you go into long term care.
- You can use the money however you’d like – the money can be used on whatever you desire. Whether it be some home improvements or that holiday of a life time you have been dreaming of.
- Interest charges can mount up – the longer you borrow through the plan, the longer interest can build. It can mean that when the plan finishes, you and your family may owe more money.
- Your family may receive a smaller inheritance – it is inevitable that you will have to repay your provider. This could impact upon how much you will leave to your family once you pass.
- You may miss out when house prices rise – if you end up having a home reversion equity plan, you basically sell some or all of your property to the provider you choose. This could impact within the future as you may not benefit if your house price rises.
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Does equity release make sense for me?
There are factors that you need to consider to decide whether releasing is the right thing for you. Before you make any decisions, you must think about:
- Your future plans
- Your current income
- Your Age
- How many money you would want to release
It can be very tempting to have the immediate boost and cash gain from an equity release. But you need to consider how this could affect your future life and future financial situation.
There are various different companies you can go to for advice around equity release. A well established and trusted company is Stepchange. They can give you advice for free on both equity releases and mortgages.