There has been a growing popularity of equity release as a way of boosting one’s finances in retirement. In spite of this growth, however, there’s still quite a lot of misinformation and information gaps about equity release.

For instance, some adults aged over 55 years don’t know that they can find an excellent equity release calculator online?

If you’re over 55 years old in the UK, you can use your home to get tax-free cash through equity release. According to Jason Stubbs, Equity Release Expert from Every Investor, today, the older generation is taking advantage of the rise in property prices to fill financial gaps in their pension through equity release.

Nevertheless, if you are going to hollow out your home’s value, you better do it right!

Equity Release Explained

You’ve probably already seen the adverts on TV, “We’ll give you your home’s value tax-free.” Or, “Call us to find out how much money you stand to release from your home.”

With there being seemingly endless choices for equity release schemes, you need to stop and ask what exactly happens behind the curtains.

Here’s a quick recap of what equity release is all about.

  • Through equity release, a homeowner can release cash from their home/property- but he or she won’t have to move.
  • One can take the money in a lump sum, or in small amounts at different times over a certain period up to a particular limit.
  • Some equity plans allow the homeowner to sell their property or part of it. However, the homeowner still retains the right to live on that property.

Thinking About Equity Release?

Equity release has its pros. At the very least, it’s a novel way of extracting funds from a property without selling. Of course, it’s a huge plus that the cash released is usually tax-free.

Most plans also come with a no negative equity guarantee which cushions the borrower in case the value of their property dips below the amount borrowed. In other words, if, for one reason or the other, the amount of money you receive outstrips the value of your home, then the equity release provider can’t access the rest of your estate.

Equity release, unfortunately, comes with a few cons too. The interest charges, for example, roll up or compound. Your lender calculates interest based on the total amount owed including your previous interest amounts. This basically means that your overall debt can increase quite fast.

Additionally, once you release equity from your home, you can’t use that home as security to take up new loans.

Downsizing as an Alternative

Therefore, as valuable as equity release is in helping people unlock cash from there homes, it isn’t always suitable for everyone. Some folks may, for instance, be better off selling and moving out– probably to a smaller place.

Aging in place isn’t always practical. You may, for example, find that your home has too many stairs for your weakened knees. It might even be so big that proper cleaning and maintenance becomes rather difficult for you and your ailing back.

In such circumstances, it’d be better to sell up and move to a home that’s more suited to your advanced age. You could then live off the extra money you gain from selling.

Equity Release Schemes

All things considered; equity release is still a very good way of tapping into your property wealth. Additionally, the low-interest rates, coupled with a wide range of innovations and products, make it easy to unlock the cash that’s tied up in a home while continuing to live in that home.

The equity release market is growing– and will continue to grow for the foreseeable feature. Therefore, there are numerous plans and products out there. Each product is unique, but they are broadly classified into two categories:

  • Lifetime Mortgages
  • Home-reversion plans

The best way to go when releasing equity, as you might guess, is to get a policy that benefits your needs the most. Hence, seeking professional equity release advice is recommended to help you make the correct and best financial decision.