Is Equity Release Right For Me?
Craig Skelton explores equity release and lifetime mortgages and how well these products can suit different people.
A recent study found that six out of 10 homeowners said they would never consider equity release. It’s not surprising, as it was the subject of a great deal of negative press a few years ago.
People’s dislike of these products is sometimes down to lack of understanding. Two thirds of the same people surveyed admitted they didn’t fully understand equity release or lifetime mortgages.
Why do people have negative views of equity release?
The main reason is that people believe you can end up with negative equity in your home, or pass debts onto your children, which is completely untrue.
There is strict regulation in place today that means all regulated products have a no-negative equity guarantee.
Why do people choose to release equity from their home?
The most common reason to take out equity release is to pay off an interest-only mortgage that is maturing. With an interest-only mortgage your monthly repayments never reduce the mortgage debt, so at the end of the 25 or 30 year term, you need to repay the full amount that you originally borrowed.
You are often expected to make the mortgage payment in a fairly short time frame, which can mean equity release is the only option.
Another common reason is gifting a deposit to help a child or grandchild get on the property ladder. They might need a 10% or 15% cash deposit to buy a home and don’t have the funds. Rather than spend your savings to help, you can use equity release to release the deposit.
A third reason to choose equity release is to repay unsecured debt. Mortgages are a ‘secured’ debt where the lender can take your home if you don’t pay. Credit cards and loans are unsecured debt, and people sometimes use equity release to clear those debts. The advantage of equity release is that you don’t have to make monthly payments – so addressing the debt can help you sleep a little bit better at night.
Some people decide to use equity release for home improvements in later life. This might include installing a downstairs wetroom or bedroom, or converting other rooms in the home.
The least common reason for equity release is holidays – world cruises, trips of a lifetime etc.
Is equity release for everyone?
In short, no, it’s not. But it can sometimes be the only option people have. The research shows that it’s people aged between 55 and 64 who are more likely to consider equity release or lifetime mortgages than those that are over 65.
This may be because today’s 55 year-olds didn’t see all the negative press from the 1990s, and are more open to exploring how equity release might work for them.
Equity release isn’t right for everyone, but it is the right product for the right people. For them, it is life changing.
How can I find out more?
If you are thinking about equity release and have questions about how it works and what benefits it might have for you, talk to an expert.
It’s completely free of charge to have a chat with an expert about the different product options, how much money you can unlock from your home and what it means for the future.
For some people it is the ideal way to solve their financial challenges. And if you decide it’s not for you, you’ll be making an informed choice.