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Is equity release for me

Is equity release right for me
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If you’re a homeowner, over time your property builds up equity. You can choose to release some or all of the equity in order to receive a lump sum of money but is equity release for me?

While it can seem like a great idea, it isn’t always the best option. It is a long term commitment so you really need to think about your options and whether releasing the equity is right for you.

Below you’ll discover everything you need to know before you make a decision.

Understanding equity release

There are actually different types of equity release available. The two most popular include Home Reversion Plans and Lifetime Mortgages.

Home Reversion Plans

Home reversion plans tend to be the least popular options out of the two because it involves selling part or all of your home to a reversion plan company. You receive a tax free lump sum of money and you get a lifetime lease. You also don’t have any monthly repayments to make. There are obvious advantages to this option. You don’t have to pay any rent while you’re living there. However, if you’re looking to leave the home to your children, this isn’t a good option for you.

Lifetime Mortgages

Lifetime mortgages are the most common type of equity release plans on offer. The money you release is secured against your home. It is more like a loan, rather than a free lump sum of money. Most of the time there are no monthly repayments to make. You simply repay the loan once you sell off your property. You will also be required to pay interest. The amount you can release if you choose this option is between 18% and 50%.

Is it the right option for me?

Is equity release right for meBefore you can determine whether or not equity release is right for you, you need to consider a number of factors. Firstly you should be aged 55 or older and the property value should be over £70,000. This can vary between providers but generally those are the minimum restrictions.

Are you thinking of moving in the near future? If so equity release might not be the best option. They are designed to be taken out until you either move into a care facility or you die. So if you are looking to move, equity release should be avoided.

ALWAYS read the terms and conditions

While both Lifetime mortgages and home reversion plans allow you to stay in your own home until you die, there are circumstances when they could force you to leave. Any breach in contract could see you homeless so you need to be sure you fully understand the terms and conditions.

Equity release has helped thousands of people get their hands on a large lump sum of money. However, it isn’t a decision you should rush into. You need to weigh up your options and think carefully about what equity release would mean for you and your home. The main thing to factor in is that you won’t have as much money to leave to your loved ones when you do pass away.

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About Jemma Porter

About Jemma Porter

Jemma Porter is an experienced content creator who has written for a number of online publications. A self-confessed penny pincher; she's often found seeking out the best personal finance deals.

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