Is Equity Release a Good Idea?

Equity release has gained significant attention as a financial solution for homeowners aged 55+ who are looking to unlock the value tied up in their homes. Morning television is full of adverts targeting the retired generation to promote releasing instant tax-free cash from their homes.

Before making any decisions, it is important to seek good quality equity release advice as to whether unlocking the value of your home is a good idea for your individual circumstances.

Equity Release Considerations

In this article, we will help you understanding the considerations by delving into the pros and cons of equity release.

Let’s explore some of the key aspects that can guide you in determining if equity release is the right financial option for you. Remember, great independent equity release advice will prove invaluable in this area.

Why Clients Use Equity Release

Our clients choose to release equity from their homes for several reasons, the main ones being; to repay an outstanding mortgage and/or debts, supplement monthly pension income, gifts to family members; to buy a new bigger or smaller property, divorce settlements in later life, or a big purchase such as a boat or car.

The amount you can borrow on an equity release plan will depend on several factors such as your age, whether you have a partner and health. Unlike normal mortgage products, your credit score is not usually a factor with this type of product.

Understanding Equity Release

Equity release is aimed at homeowners over the age of 55. Your property, which needs to be your main residence, will have to be valued at £70,000 or more to qualify. If the property is in joint names, the youngest applicant will need to be aged 55 or over.

The amount of tax-free cash that you can release will depend on several factors such as, age, health and the value of your property. There are two types of equity release available, a lifetime mortgage, which is most recommended, and a home reversion plan.

Pros of Equity Release

• Flexibility: You can take funds as either a lump sum or smaller chunks as and when required. Taking money in small chunks will save on interest payments.
• Retaining ownership of your home: It’s a common misconception with equity release plans that you’ll lose ownership of your property. This isn’t the case with 99% of plans. The market now, unlike in years gone by, is heavily regulated and full of brilliant customer friendly products.
• No negative equity guarantee: This guarantee brings peace of mind to our clients that you’ll never owe more than the value of your home, all the equity release plans that we offer have this guarantee included.
• Monthly payment options: Payment options are flexible, pay a monthly amount or not, it’s up to you and whether this fits your individual situation, we’ll help you decide and do the maths to recommend a way forward for you here.
• Inheritance planning: An equity release product may be recommended by your financial advisor as part of your financial plan/pension planning. If this is the case, we’ll happy work alongside them.

Cons of Equity Release

• Very limited or poor advice: As mentioned earlier, it’s important that you seek great later life mortgage advice before you commit to an equity release plan. We are proud to be one of a few companies in the UK that can provide advice on the full range of age 50+ mortgage products and call ourselves independent.
• Should always be a last resort: Your later life mortgage advisor should compare all the other age 50+ lending solutions ahead of recommending an equity release plan. These should always be a last resort. Other product types include regular mortgages that can run to age 85+, over 50’s interest only mortgages, retirement interest only mortgage options and finally a lifetime mortgage/equity release plan.
• Impact on means-tested benefits: Releasing tax-free cash from your home may impact any means tested benefits that you receive. Our equity release advisor will help run through this with you if relevant.
• Reduce your inheritance: We find that involving your family members early in the process will help with the understanding of your inheritance plans.
• Early repayment charges: These usually apply for the first ten years of a plan. As mentioned above, equity release is not something that should be recommended lightly and other age 50+ mortgage products maybe more suitable and will need to be discounted by your equity release advisor.

Equity Release Considerations

Deciding whether equity release is a good idea requires careful evaluation of the pros and cons, considering your financial goals and personal circumstances.

While it can offer valuable opportunities to access funds tied up in your property, it is crucial to weigh the potential impact on inheritance, long-term interest accumulation, and eligibility criteria.

Seeking advice from a qualified professional, like us, to fully understand the risks and benefits associated with equity release is vital. With careful consideration and great guidance from our specialist equity release advisors, you can make a well-informed choice that aligns with your financial objectives.

Equity Release Advice

Given the complexities involved in the later life mortgage range and equity release plans, it is strongly advised to seek independent mortgage advice from qualified experts, like ourselves.

An experienced equity release advisor can assess your specific situation, explore alternative options, and guide you through the process to ensure you make an informed decision.

Book a Free, No-Obligation Consultation

If you feel ready to take the next step with us, we’d love to hear from you. You can telephone or book online to arrange a free, no-obligation consultation where we can discuss your later life/equity release mortgage options. 

We’ll answer all your questions and recommend a way forward. We don’t need anything in the call other than your ages and your address. Evening calls are available to fit around any work or family commitments. 

Written by
Malcolm Davidson
Managing Director of UK Moneyman Ltd.
MAQ & CeRER Qualified

Last Edited 29/06/2023

About the Author

Malcolm Davidson

Managing Director of UK Moneyman LTD

Malcolm is one of the UK’s most well-known and respected Mortgage Advisors. He is passionate about providing a 5* customer experience and he has also trained and mentored dozens of fellow Advisors in a career that is now in its third decade.

In addition to his day to day duties as Managing Director, Malcolm still gives out mortgage advice and feels lucky that his job is also very much his hobby.

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