Equity Release: The Advantages, Disadvantages and Alternatives
According to a recent study from Cebr, people aged over 50 posses 75.9% of UKs household assets. This property wealth has steadily increased due to the rise of people aged over 50 in the population, as well the recent escalation in property values.
More and more people are turning to equity release as means of freeing the money held in their property assets. Equity release provides a means of borrowing against the value of your home, with the benefit of being able to remain living in your home.
What are the benefits of equity release?
There are clear benefits to equity release schemes. As well as delivering a lump sum or a regular monthly income to increase your overall retirement income, this money could also be used to clear existing debt or mortgage repayments. As well as a means of funding later life, equity release provides the funding for people who may need to adapt and improve their home in order to remain in their home for longer.
As it is growing increasingly difficult for younger people to get their foot on the property ladder, some people choose to use equity release to generate funds that can be given to children or grandchildren so that they can buy or put a deposit down on a property of their own. Equity release can also be used for a once in a lifetime holiday, such as a world trip for themselves or the whole family.
What are the possible disadvantages of equity release?
It is also important to remember that despite presenting advantages, the option of equity release is not for everyone. There are notable drawbacks such as the fees associated with taking out a scheme of this nature, as well as high interest rates depending on the plan you choose. If you want to repay back the money earlier than you originally intended, you may face charges. Taking out an equity release can also affect any benefits you otherwise would have been entitled to.
Depending on your situation and the reasons behind wanting to take out an equity release, it may be worth considering all your options as well as potential alternatives.
What are the alternatives to equity release?
Rather than taking out an equity release to modernize and renovate your home, it may be a more cost effective option to downsize to something more suitable. If there are particular repairs or modifications that are needed, research whether there are any grants available to assist you. Moreover, rather than buying a new home there you could rent instead. Finally, if you are looking for financial assistance, see whether it is possible to get a different type of loan.
If you are thinking about taking out an equity release, make sure you have access to all the information you need. It may also be worth using the services of an independent financial adviser in order to get an informed perspective.
Author Bio: Kitty Mellow blogs for Saga Equity Release.