Equity release has spiked in popularity over the last 11 years, but why? What is so great about equity release? Well, read on to find out everything you need to know!

Equity release allows you to use the equity you have within your property(s) and spend this money on things such as paying off a previous interest-only mortgage,  helping children/grandchildren with house deposits, renovating your property, or even just to create a healthy money pot to allow you to travel and do what you want! You can draw the money down immediately, or with modern day schemes, you are even able to draw money down in various stages to slow down the accrual of interest on the debt. Equity release is available to homeowners aged 55 years+. This isn’t to say the scheme is automatically the ‘go to’ option for you as there may be other scheme types that are better suited. In fact, you would be deemed as young at the age of 55yrs in the equity release market, thus limiting your lending amount and options.

A benefit of equity release is that the repayment of this type of debt is by way of the borrower being taken into residential care or passing away, so there are no monthly repayments. So, because of this there are minimal financial stresses on a month by month basis. This is ideal for most people within this age bracket due to the rising demands of living expenses and the lack of pension income available to the client. To add to this, the NNEG (No Negative Equity Guarantee) protects the borrower in the event of a decline in the housing market. This is something that was not in force in years of old which then resulted in a market crash and bad press for equity release.

Equity release can also be used for inheritance tax planning. We would always advise speaking to a tax consultant or a financial adviser to look at the pros and cons.

We need to highlight a number of potential disadvantages with equity release, for example, interest is compounded, resulting in a steep increase in the total debt within a 12 year period. Another disadvantage is that this can mean that your family will receive less inheritance, this happens if the value of the property rises at a slower pace than the interest rate on the mortgage.

So, equity release has many benefits, and over the past 5 years we have seen a substantial rise in the use of this type of lending to raise capital for children and grandchildren to fund property purchases and, as of late, to ensure there is an exit strategy for those who had pure interest only mortgages with no intention to downsize to repay the original debt.

Are you considering the pros and cons of equity release? Would you like to learn more, and see which options would be best suited to you? Talk to us at Integra Financial!

Phone: 0117 251 0083

Email address: enquiries@integraf.co.uk 

PLEASE NOTE: Equity release may require a lifetime mortgage or home reversion plan. To understand the features and risks, ask for a personalised illustration. Equity release has to fit with a customer’s needs, circumstances and preferences, where the benefits need to outweigh the drawbacks (including outweighing the adverse effects on the customer’s entitlement to means-tested State benefits and their personal tax position) and be more suitable than alternative methods of raising funds.