Equity Release: Things To Consider
If you are a homeowner aged 55 and above, equity release might be something you have considered doing. It allows you to release equity from your property which can provide you with an additional income or lump sum.
This can then be used to get out of debt, go towards your retirement or for family holidays. It also allows you to continue living in your own home. Having the choice of how you spend your money and remaining in your family home is what makes it so appealing. But while it might seem like an obvious solution, it’s a decision that requires plenty of thought beforehand.
Many homeowners can find equity release to be more expensive in the long run as the money needs to be repaid. In some cases, it can also affect eligibility for grants and government benefits too. So before entering an equity release scheme, consider these alternatives first.
Downsize your property
Downsizing to a smaller property could be a less costly way of releasing equity from your home. Your children might have moved out, or your home might be too large for just you and your partner. Selling your home and moving into a smaller property could give you the extra money you require to pay off debt or buy a new car. It can also provide you with a more suitably sized home and a better location. But downsizing can come with it’s own issues. It might take a long to sell your home or to find a property in the right area. You may also experience a reduction in your asking price or feel stressed about the move and all it entails. So again, it’s a decision that you shouldn’t take lightly.
Before you decide to downsize your property, it might be beneficial to use the Which equity release calculator online. Having an approximate idea of how much equity can be released from your home can help you decide whether it’s worth downsizing or not.
Use your savings
Something that many equity release schemes encourage and recommend is using your existing savings. If you have enough money saved up to pay off outstanding debts or university fees, there is little reason for you to release equity from your home. Borrowing money that you don’t need will only cost you more in the long run. So determine how much money you need and access your saving accounts to see if you have sufficient funds. Many homeowners often feel anxious about using their savings as they feel they are losing their safety net. But getting out of the red or buying essential items will make your lives more comfortable and stress-free. Plus you can enlist the help of a financial advisor to develop a new savings plan that you can begin as soon as possible.
If you don’t have any savings to help you, then equity release could be a suitable option. Talk to an equity release provider to find out more information and to see how much you could gain.
Ask your family Instead of Equity Release
Another alternative you might want to consider is asking your family for financial help. This is something that many people feel uncomfortable doing. But if your children or relatives are in well financially stable and able to give you the money you need, it could benefit you to ask. You can borrow the money and set up a repayment scheme to pay them back over time. They may even be able to buy your property from you and allow you to continue living there. However, this can lead to issues later on. Should you and your child fall out, they could then force you out of your home, leaving you homeless. Or if they lose their job they may be unable to continue making repayments on the mortgage. So it’s best to consider these concerns before making impulse decisions.
If your family are not in the best position to help you, then considering releasing equity from part of your home could be wise. If you need the money to help your children pay for their first house or to give them an early inheritance, equity release could help you.
These options are all excellent alternative to releasing the equity from your home. But they will not be suitable for everyone. While it’s good to consider your options, sometimes equity release is the smartest solution. So if you still think that equity release could be the right option for you, consult with an expert and do further research into what it involves. The more understanding you have about it, the more informed your decision will be.
