Advantages and Disadvantages of Equity Release

Equity release is a scheme in which you can get loan on the equity built on the home that you own. This is scheme available for people aged 55 and above. However, equity release is not for everyone and you will need a financial advisor to counsel you on the same. There are advantages as well as disadvantages of equity release which you should know before going for it.

Advantages:

  • Equity release will give you good amount of money as a lump sum amount or as regular source of income
  • There are products which do not require you to make any payments until unless you sold your house. Some initial charges may apply.
  • You still retain the right to stay in your house as long as you are alive.
  • You can move out of your house without any obligation

Disadvantages:

  • Equity release on your home reduces the overall value of your home and also the amount that would go to your family of beneficiary after your death.
  • One of the products of equity release requires you to sell a part or whole of your home for burrowing money from them. This may not be very beneficial for you, you may look to other alternatives to raise the fund you need.
  • The equity release scheme in the long run may become very expensive as the interest accumulates and sometimes becomes more than the amount you borrowed in no time. It may further downsize to a smaller property.
  • Opting for equity release always reduces the value of your estate and also your entitlement for many state granted benefits. However, you should consult an expert to check the benefits you are eligible before and after the equity release.

You should go for equity release only after weighing the pros and cons of opting for it.