Using the cash value held in your home sounds appealing but you should always consider equity release carefully. Meeting immediate needs is one thing, but don’t forget the years to come.
Equity release is a way of staying in a house but “cashing in” and using some of its value if you are 55 or older. It is effectively a loan, and the income-provider must be repaid at a later date. This is usually when the homeowner dies.
There are many reasons why people need access to money. There are so many different factors that impact on how we all live our lives.
Some need to clear a debt, others require a little more income, and some wish to enjoy the finer things in life while they can.
If you have reached the retirement milestone you probably have many exciting ideas and plans lined up. Sometimes, it can be tricky being able to realise those dreams if income is limited.
Why do you need to release equity?
Before you proceed with equity release the key question to ask is why you need the money. Also, are there alternative options?
This is where good, independent advice can help.
If it’s to top-up income during retirement you should ask if all other avenues been explored?
Are you receiving all of the state benefits you are entitled to? Also, do you have other pensions or investments that could be used before considering cashing in some of your home’s value?
That’s quite a number of things to consider. Making sense of it all and prioritising can be stressful. You should take time to think about each point carefully.
Other reasons to choose equity release might be for home improvements. There could be debts to pay that have built up before you retired. And looking forward, you might want to ensure that care fees are covered during older age.
All of the above can often be solved by other means. Check if grants are available for changes around your home. Draw up a thorough cash-flow forecast to see if the debt can be reduced on a monthly basis.
As for care fees, moving to a managed property or retirement village could keep you in control of your finances without mortgaging your property.
Making the right financial decision
Deciding whether equity release is a good decision depends on many factors. Your age is very important. Take money from your home’s value too soon and you’ll limit your options in later years.
How about your income? That doesn’t just mean private and state pensions. Do you have a part-time job, or are you considering getting one? This could dramatically affect your cash-flow.
If it’s a quick cash boost you’re after, are there unwanted or unnecessary items you could sell? This might sound strange, but most of us hoard and store items that will forever sit in garages or lofts.
These things have a value that could be released.
Of course, other actions could involve downsizing or even renting out some of your property. This could potentially provide additional funds, reduce outgoings and create an ongoing additional income stream.
All food for thought ahead of making financial decisions you could later regret.
Independent advice about equity release
We’ve helped many families and individuals through the equity release maze. Our advisers make things simple. We don’t rush things. Logic Wealth Planning helps clients assess the best route forward.
Understanding what you hope to achieve from life is always the starting point before we discuss releasing capital from your home.
If equity release is the best option we’ll outline the different ways to achieve it, depending on your circumstances.
We’ll talk about borrowing as little as possible, and highlight the benefits of ensuring that any provider is a member of the Equity Release Council.
We’ll also discuss why paying interest (instead of compounding interest) can help you and loved ones in the future.
We offer independent financial advice. You get to sit down and chat with professionals who help you make informed decisions.
Call us now on 0808 1234 321 or email email@example.com and we’ll synchronise those diaries.