Equity release is a great option for certain individuals in need of extra funds during their retirement. What better way to get those funds than from equity in your home? It’s become a popular option recently with people later in life because of the rising cost of retirement and increasing levels of debt.
This article does not constitute advice. Professional advice should be taken prior to acting on any part of it. Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.
Choosing equity release is not always down to negative circumstances though — people are living longer and they may not have planned for such a lengthy retirement when they were saving. Perhaps they’re in need of cash to renovate their home or want to help their loved ones. It’s not right for everyone and indeed there is a quintessential customer type that benefits from equity release, but is it a safe option?
Equity release products consist of lifetime mortgages and home reversions, and these are fully regulated by the Financial Conduct Authority.
When searching for a provider, be sure to check that they retain membership to the Equity Release Council for added protection. Members must abide by a stringent set of rules intended to safeguard consumers.
The main goal behind these protections is a “no negative equity guarantee” which means you’ll never end up in a situation where you owe more than what your property is worth. Additionally, you retain “security of tenure” – in other words, you have the right to live in your home for the rest of your life.
You are also required to seek advice from a financial professional and if you are working with an ERC member, they’ll request that you seek legal advice before making a final decision regarding equity release.
What about the drawbacks?
Of course, it’s not all sunshine and roses, and you’ll learn all about the potential drawbacks by seeking financial and legal advice. Releasing equity from your home now reduces the wealth of your property should you need it even later in life. It also reduces potential inheritance, and the compound interest associated with these products can often snowball if you’re not careful.
Financial experts assert that with all the legislation in place, and by working with a member of the Equity Release Council, equity release is a much safer option than it previously was. In fact, some contend that for consumers who are considered prime for equity release, it’s a safer option than a standard mortgage as there’s no risk of arrears, default, or possession.
Speak to us about equity release
If you are considering equity release as a way to help fund part of your retirement, don’t hesitate to get in touch with a team member to discuss options.
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