Buyers' Guide - Equity Release
Thousands of people who want to boost their income in retirement have turned to equity release. But it's not right for everyone and the products aren't all the same. So let Moneywise help with our Buyers' Guide.
If you are retired and are discovering that you don't have enough to live on, equity release is one option worth considering.
These products enable homeowners to access some of the capital that has built up in their home, but they can be expensive so rule out cheaper alternatives first.
There are two types of equity release; lifetime loans, which are mortgages that you don't repay until you die or sell your home, and home reversion schemes, where you sell some or all of your home to an insurance company.
There are pros and cons to each type. With lifetime loans, the interest rolls up, so your debt can grow quickly – often doubling every 10 years.
With a home reversion scheme, the insurance company takes a percentage of the property's value when you die. If house prices have risen the company could make a hefty profit.
As a rule, the older you are when you release your equity, the cheaper it will be.
Make sure you look for an equity release provider who's a member of SHIP – which stands for Safe Home Income Plans. Their members have to sign up to certain guarantees.
Before you take out a plan, check it won't impact on any of the benefits you are currently claiming. You should also think about its affect on any inheritance you want to leave.
And finally make sure you talk about your plans with your family and seek the advice of a solicitor before you go ahead.