Friday, 17 November 2017 09:43

Benefits of equity release

We live in very difficult financial times and both the youngest and oldest in our society are struggling when it comes to making ends meet and getting hold of necessary cash.

For the youngest in our society it is house prices that are the biggest hurdle. People can’t break into the property market like the generations before them. There are many reasons for this. The major factor is that house prices are extortionately high and people just can’t afford to save up enough of a deposit in order to get a mortgage to cover the high prices. Then there is the fact that wages haven’t risen in quite a time and this means that the gap between asking prices and people’s take-home pay has widened to unsustainable levels.

Despite what the younger generation may think, the older end of society aren’t having it too easy these days either. Of course, there are those who managed to retire early and enjoy their retirement funds and we can all be envious of them seemingly breezing through life. But this does not reflect many people of retirement age and their current lifestyle. Which leads us onto this week’s blog topic – is equity release worth it?

Many people, especially people over 60, are looking into this option as finances get strained and work starts to need doing on their homes that they simply can’t afford.

So, what is equity release and is it a viable option?

Equity release is basically the process of releasing money from your home without the need for selling the property entirely. A lot of people decide to look into this option when they need cash for home improvements and bills as it is a quick way to get hold of cash without actually feeling the pinch. The scheme works by basically establishing the market value of your home and then you, the homeowner, take a cut off that value (depending on what you require) and that money then comes off the potential sale price of your home and into your pocket. The only time you will realise that you will not get the full value of your home will be if you ever decide to sell it.

As you can probably gather, for people who have a large home but not much ‘spare cash’, equity release is a big lure. The scheme allows a person’s home to be an income for them. Whenever cash is needed for repairs etc they can dip into the value of their home and make necessary changes.

Without equity release many elderly people feel they would’ve had to sell their beloved property that they have worked so hard for whilst in employment. Equity release has meant that they get the cash they so desperately need without having to sell the property that they own.

It isn’t just home improvements that equity release cash can be used for. Ultimately, the cash that is released can be used for whatever the homeowner feels necessary – this could be bills, or for other projects.

Of course, as with anything, there are some downsides to be made aware of. Interest is a big player and this will need researching as many homeowners will end up paying more than they anticipated.

A couple of other things include; if you had planned on leaving the property as part of an inheritance to family, equity release means the family will not get as much because the home’s value after such a deal is considerably less than the true market value of the property.

Valuation costs will also mean that you will have to pay some money out before the ball can get rolling with regards equity release on a property.

As with a lot of things, there are advantages and disadvantages to this kind of thing, and it really all depends on circumstances whether or not it will work out for you. One thing that is advisable is that before you make any kind of decision with regards equity release, make sure you know the ins and outs and source other options to ensure there isn’t a better option out there for you.

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