Should I release equity in my home?

Equity release as a concept is not new, but equity release products are growing in popularity.  The number of products on the market has doubled in the two years to August 2018, and lending through such schemes grew for the seventh consecutive year in 2018.  Kiri Saunders-Brown, Solicitor in our Southampton Residential Conveyancing team, explains what equity release is and why it could be the right option for you if you are looking for an injection of funds.

What is equity release?

Equity release is a method of accessing funds from the value of your home at an age when you may not be able to obtain more conventional mortgage finance.  “The funds you release can be used for any purpose you wish, for example as a foundation for your retirement,” explains Kiri.  “We are also seeing many of our clients using equity release as a way to give money to their relatives to assist them in buying their own home.”

David Burrows, Chairman of the Equity Release Council, has recently commented on the rise of equity release being used: “The equity release market continues to experience sustained growth as it proves a vital tool for consumers to make the most of their financial resources in later life. Older homeowners are realising in growing numbers that property wealth can play a crucial role in supporting their retirement alongside pensions, saving and other assets.”

Why should I release equity in my home?

One of the main benefits of equity release is that you release funds without having to sell your home.  “There is also a great deal of flexibility with equity release,” continues Kiri.  “There will be various options to suit your own situation, for example you may have the option of not making monthly payments at all during the life of the loan.  You may also be able to draw funds in stages as and when you wish, meaning you could reduce the interest charges early on.  One other benefit is that you can use the funds towards gifts to family members without attracting Inheritance Tax.”

What are the disadvantages to equity release?

While equity release does have its advantages, it is important to remember it is a debt and so comes with the associated responsibilities.  There are subtle differences between equity release and a conventional residential mortgage as the debt accrues as time passes which can often lead to the debt doubling over 16 years.  No other finance can be raised against the property once an equity release product has been taken, and if you are planning on early repayments, there are penalties that can be prohibitively expensive. 

Kiri concludes, “Whilst there is no restriction on the use of funds raised by equity release, it is of course a very important decision, and can have consequences, not least on the value of your estate upon your death, or entry into long term care.  Equity release will not be for everyone and it will depend on your own personal situation; for this reason it is essential that you seek legal advice from an experienced professional so we can discuss the various options available to you and how equity release could impact your future.” 

We can assist clients local to all our offices, but please note that the advice process will involve a home visit (included in our fee to advise you).  If you are considering releasing equity in your home and would like to request a fee estimate or have any initial questions answered, please call Kiri Saunders-Brown on 023 8071 7438 to find out more.  Alternatively, email conveyancingquote@warnergoodman.co.uk.  For details on equity release, read our other related resources here:

• Equity release explained
• First time buyers being helped by equity release
• Do I need to see a Solicitor before releasing equity in my home?
• How long does it take to release equity?
• Can I use equity release to buy a second property?
• Is equity release safe?
• Can I sell my home if I have released equity?
• How does equity release affect Inheritance Tax?
• Should I downsize or release equity?
• Why we joined the Equity Release Council

ENDS

This is for information purposes only and is no substitute for, and should not be interpreted as, legal advice.  All content was correct at the time of publishing and we cannot be held responsible for any changes that may invalidate this article.