Is Equity release the best option to raise cash when you retire in Brighton or Hove?
In Brighton and Hove, many home owners have over their lifetime found they have a large amount of equity in their property. Is it wise to use some kind of Equity Relaese mechanism to partially fund retirement?
A. According to the latest figures, more and more people are apparently turning to equity release, effectively handing over a share in their property in return for a cash sum now.
Obviously, you can look at this in two ways: either as a ringing endorsement of an increasingly popular financial product that meets a particular need, or as a worrying reflection on the growing financial pressures being felt by predominantly older people, forced to borrow against their most valuable asset as a way to make ends meet.
Admittedly, if you don’t have any family to worry about, then equity release may look like an attractive proposition. Why continue to struggle on, day by day - or even deprive yourself of that much dreamed-of holiday of a lifetime -- when all the time you are sitting on a goldmine? After all, you can’t take it with you!
Nevertheless, like any “cash now, pay later” proposition, equity release is an expensive way to borrow money. There are two main types: The lifetime mortgage is, as its name implies, a long term loan secured against your home – except that you don’t have to make any repayments.Instead, the interest is simply added to the original loan - which consequently mounts up veryquickly. Home reversion, meanwhile, basically involves selling a share of your property, so youand the provider become co-owners. The catch in this case is that the amount you receive up-frontis based on your home’s current value, while the cost is based on its value at the end of the deal…
However, cost is not the only issue. Effectively signing away a share in your home is not something to be undertaken lightly. Bearing in mind the age-old principle of “caveat emptor,” I would therefore urge anyone contemplating equity release to approach the subject very carefully indeed, making sure they get professional – and objective - guidance from a suitably qualified financial advisor.
Meanwhile, of course, there are other options which may better meet your needs. For example, if staying in your existing home is not a particular priority, Perhaps downsizing could be an option instead. If you need to release a substantial capital sum, selling your house and buying somewhere smaller will generally release considerably more funds – and of course leave you in full ownership of your new home!
Of course, before making any big decisions like this, the first step is to get independent financial advice from someone you trust.