Equity Release – For’s and Against
As most pension pots dwindle away, more people turn to property as a means of a secure retirement and in turn so do the amount of people who are choosing to release equity from their home to provide them with an income.
It is especially popular for those who are approaching retirement and either their pension does not provide adequately for them or most of the equity is tied up in their home.
If you have paid off your mortgage your home can be a source of income without the need of selling up and downsizing.
You are effectively releasing the capital from your home on the condition that when you decide to sell your home, go into long term care or pass away the equity release company are paid off.
The advantages of equity release are clear – you need not downsize or sell your home whilst receiving an income. This is particularly popular with single or couples without children.
The disadvantages being, in effect you are starting a reverse mortgage which quickly diminishes the value of your home.
It is important you consider all relevant factors before you do sign up for a scheme.
For example, you must consider whether you had planned on leaving any gifts / bequests to family, friends or charities. In essence you are signing your home away and as such your inheritance will be diminished.
In some cases it has been known that a child or children would have purchased the property from their parents just below market value, meaning equity release need not have been used.
Additionally, if you currently receive benefits, this may change as you receive your new income from your house. It is usually necessary to seek professional advice or at least have a clear view of your personal circumstances if you decided to go ahead and release equity from your home.
Careful consideration is necessary to ensure that you only borrow as much as you anticipate you will need, to reduce the future interest payments.
At Solomons Solicitors we offer a free no obligation initial meeting to discuss any questions you may have regarding releasing equity from your home.
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