What Is Equity Release? Essential Things To Know

Wondering about equity release? Equity release is a popular financial product that allows homeowners to boost their finances by freeing money tied up in their property.

It can be a great way to boost your retirement pot, take a once-in-a-lifetime trip, help loved ones out, or simply improve your quality of life. Equity release also has a lot to consider, and it is not the best option for everyone.

This post will go over the basics of equity release so that you can better understand the product and determine whether or not it is the right option for you.

What Is Equity Release?

As mentioned, equity release is a financial product that allows you to unlock some of the money tied up in your home. It is available to homeowners over the age of 55, and you are able to continue living in the home. There are two main types:

Lifetime mortgage: The loan is secured against the value of the property. The loan and built-up interest are paid by selling the property when the last borrower dies or moves into care.

Home reversion: Part or all of the property is sold to a provider for a lump sum or regular payments. You can continue to live in the property rent-free or for a nominal rent.

Interest Rates

Interest is charged on lifetime mortgage loans, which can be fixed or variable. This means that the interest rate is a key component of equity release, and you will want to find a favourable rate (which will be difficult in the current economic climate).

Inheritance

Another key consideration of equity release is that it will impact the inheritance you leave behind to loved ones. The equity that you release from the property and interest accrued will need to be paid from the proceeds of selling the house once the last borrower has died or moved into long-term care.

This means that you will be leaving less behind (but many use equity release as a way to help loved ones out financially while they are still alive).

Speak To A Financial Adviser

As such an important financial decision that will affect you and your loved ones, you always want to make sure you make the right decision. This is why speaking with a financial adviser before deciding is intelligent.

You can find local financial advisers by using online platforms, allowing you to browse various advisers near you, including those specialising in equity release. They can offer advice based on your individual circumstances and help you fully understand the complexities of equity release.

Alternative Options

As you can see, there is a lot to consider with equity release. It can work well for some people but not so well for others. Therefore, you should always explore your options and look into alternatives. These could include:

  • Bank loan
  • Financial assistance from loved ones
  • Using savings
  • Downsizing
  • Delaying retirement

Equity release can be an excellent financial product for some homeowners, but it is not for everyone and is a huge financial decision that you need to weigh up carefully.

Salon Privé

Salon Privé Magazine is the quintessence of luxury lifestyle journalism, renowned for its sophisticated portrayal of the opulent world since its inception in 2008. As a vanguard of high-end living, the magazine serves as an exclusive portal into the realms of haute couture, fine arts, and the aristocratic lifestyle. With over a decade of expertise, Salon Privé has established itself as the definitive source for those who seek the allure of luxury and elegance. The magazine's content is crafted by a cadre of experienced journalists, each bringing a wealth of knowledge from the luxury sector. This collective expertise is reflected in the magazine's diverse coverage, which spans the latest in fashion trends, intimate glimpses into royal lives, and the coveted secrets of the affluent lifestyle. Salon Privé's commitment to quality is evident in its thoughtful collaborations with industry titans and cultural connoisseurs, ensuring that its narratives are as authoritative as they are enchanting. With accolades that include being voted the number one luxury lifestyle magazine in the UK, Salon Privé continues to be at the forefront of luxury journalism, offering its discerning readership a guide to the finest experiences the world has to offer. Whether it's the grandeur of global fashion weeks, the splendor of exclusive soirées, or the pursuit of wellness and beauty, Salon Privé Magazine remains the emblem of luxury for the elite and the aspirants alike.