Equity release has shown a marked rise in popularity since 2011, particularly among 65- to 74-year-olds who are opting to unlock tax-free cash to supplement their retirement income or enhance their quality of life. With a 17 per cent increase over the past three years and over £1.07 billion unlocked through equity release in 2013 alone, many pensioners are wondering whether equity release might be the right option for them.
At Homeline Mortgages, we pride ourselves on giving frank advice to each of our clients. Here, we’ll give you a breakdown of what equity release involves, as well as an overview of the benefits and disadvantages, to help you make the most informed decision possible.
What is equity release?
Equity is the value of your home, minus any outstanding mortgage payments; equity release refers to the range of financial products available which allow homeowners to convert a proportion of that equity into cash, and can also be referred to as a lifetime mortgage.
Why the growing popularity?
Equity release has risen in popularity, primarily in response to low retirement incomes that leave many pensioners struggling with expenses and unable to fully enjoy their golden years.
Lenders have also become increasingly innovative and flexible in their product offering when it comes to equity release. As such, borrowers are now getting the opportunity to pay off the interest of their loan within their lifetime, protecting their property value and their heirs’ inheritance, making equity release a far more attractive option.
Is equity release a good idea for you?
Equity release differs from a regular mortgage in that there are no repayments until the property is sold, which is usually after the homeowner’s death. This can make equity release an excellent option for pensioners in particular, many of whom have owned their homes for decades and therefore welcome the opportunity to capitalise on the increased value of their property without having to sell or move house.
Equity release plans are usually also quite flexible, allowing you to unlock funds as you need them, to pay for virtually anything you like, from home improvements, travel, and healthcare to helping your children onto the property ladder or enhancing your retirement lifestyle.
However, it’s important to note that the interest on equity release grows and compounds at the fixed rate (typically around 6 per cent), so that it can make a substantial dent in your heirs’ inheritance and prove quite costly. That being said, the more innovative new financial products currently being offered by lenders allow borrowers to surmount this disadvantage.
If you’d like expert advice on whether equity release might be the best way for you to secure tax-free cash without having to sell your home, contact us at Homeline Mortgages today. Our discreet, experienced mortgage advisors can give you all the insights you need to make the best possible financial decision for you.