What should you consider before choosing equity release?
#Equity Release

What should you consider before choosing equity release?

Catherine McFarland
October 2023

Before opting for equity release, understand the implications and take time to weigh up alternatives.

Accessing the wealth tied up in your home can be tempting when finances are tight. But dipping into your property equity via equity release requires careful thought before taking the plunge.

Whilst releasing cash from your home might provide a useful capital injection, it can also have lasting impacts on your finances and estate if not approached cautiously.

So, when might equity release be a suitable option?

Equity release could be a potential option if you need to unlock capital to:

  • Supplement your retirement income
  • Pay off any outstanding debts
  • Fund home improvements, adaptations or repairs
  • Provide early inheritance or substantial gifts to loved ones
  • Have money set aside to cover potential future care costs

However, equity release won't necessarily be the best solution for everyone. You should ask yourself some searching questions like:

  • Why exactly do I need to access this cash - is it an essential requirement or just a “nice to have”?
  • Have I thoroughly explored and evaluated alternatives to equity release first?
  • Am I comfortable with how equity release may reduce the size of my estate and inheritance I can leave behind?

Fully understand the implications

Before opting for equity release via an equity release mortgage or home reversion plan (LiveMore do not offer Home Reversion Plans), be very clear on how it could impact:

  • The future value of your estate and inheritance your beneficiaries will receive
  • Your eligibility for any means-tested benefits you currently claim
  • Potential inheritance tax liability on your estate

Also consider things like:

  • Any early repayment charges you'd face if looking to pay off an equity release loan
  • How it could affect the affordability of purchasing a property in future
  • Whether equity release may restrict your ability to downsize or move to sheltered accommodation later in life

Whilst equity release won't directly impact your credit score, it could influence lenders' decisions when you apply for credit in the future.

What factors determine the best age for equity release?

The ideal age to access your property wealth can vary based on factors like:

  • Your life expectancy - The older you are, the higher the amount you can typically borrow.
  • The loan term - Longer terms mean more interest rolls up over time.
  • Existing health issues or potential care needs - If you may need long time care soon, a lifetime mortgage may not be advisable.

Consider alternative options

Although equity release will be the optimal solution for some, alternatives to equity release like downsizing, remortgaging, home equity loans or using existing savings may be preferable for others.

Seek expert equity release advice on which option best fits your unique financial situation and requirements.

Speak to an Authorised Adviser

Our team will see if one of our over 50s mortgages would enable you to release equity from your property.

What are some alternatives to equity release?

  • Downsizing to a smaller property in order to free up capital
  • Remortgaging your existing mortgage onto a better rate deal to reduce payments
  • Taking out a home equity loan which lends at lower amounts over a fixed term
  • Using existing pension pots, savings or investments you’ve built up

The key is fully assessing equity release against the alternatives based on your individual circumstances and needs. Ask yourself "Is equity release right for me?" and weigh up the pros and cons of equity release.

Seeking guidance from a regulated financial adviser can help you understand the right choice while avoiding potential pitfalls of equity release.

If you’ve decided that equity release is right for you, speak to a reputable provider who will tell you the next steps.