Equity release for many of the older generation can be a nightmare if they're not setup and researched properly. This is not meant to scare because Equity Release done right can offer major benefits. But RESEARCH and UNDERSTANDING are the key.
Thankfully not only is the government planning to regulate Equity Release but institutions such as the Actuarial Profession have come out with guidelines in a very detailed report.
An Important Point
Reading between the lines of the report the Actuarial Profession are not the greatest fans of Equity Release and do mention that 'trading down' (selling a property for say £250k, moving to a property worth £150k and utilising the cash windfall) for most people is a far better plan of financial attack. Basically by trading down you remain debt free.
The Actuarial Professions 4 Key Equity Release Guidelines
- Consider all the other options to equity release, e.g. have a "benefits check" to see if there are any state benefits they are entitled to but not claiming; investigate trading down, use of savings, or the sale of other assets
- What is your view on leaving any major inheritance. Equity Release is likely to leave no value in your property to bequeath to your family so always involve them in any financial decisions
- Seek advice from a properly qualified advisor and make sure the advisor has considered other alternatives. This point is CRITICAL
- Make sure you fully understand the contract you are entering into and before committing go to an independent solicitor to have the legal contracts fully explained
Summary
The old military saying of 'time spent on recognisance is time seldom wasted' fits perfectly with those looking to take out Equity Release schemes. Investigate them fully but also rely heavily on independent financial advice. Remember you are dealing with what's likely to be your single most dominant financial asset.
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