Living happily ever after?

Nick Freeth, Managing Director at Retirement Homesearch looks at the pitfalls to avoid with equity release.

There’s been a growth in the equity release sector, suggesting that fewer older homeowners are downsizing and are instead using their existing flats to release money for later life. But this may not always lead to a happy ending. There are pitfalls to avoid.

Equity release is the right solution for some people.

However, we must make sure that property owners are making fully informed decisions, to avoid them sacrificing longer term flexibility and security for both themselves and their families, for short-term financial support.

Equity release can be a fantastic way of providing lifestyle funding.

It allows people to do things they have never been able to afford, and that has to be a positive thing.

Even people who choose to release equity – say, at the start of their retirement – on the assumption that they are in their twilight years could, in fact, live for several more decades, leaving themselves short of vital funds later in life.

When someone makes a decision to release equity from their home, there are instant consequences that are not often talked about.

You will rarely get anything near the true market value of your property, plus it’s important that anyone looking into this option understands the penalty charges that are linked to early exit plans, and potential entitlement issues concerning their State Benefits.

For older people in particular there are other options available for those looking to release money. One being downsizing to a purpose-built retirement development.

We know that people who make this decision value lifestyle factors, such as friendships and a ready-made community, as much as the financial advantages.

I would recommend anyone considering their options look at getting independent advice, not linked to an equity release company, before making any final decisions.

Nick Freeth is the Managing Director of Retirement Homesearch, helping people find their perfect retirement property for over 30 years.

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Reviewed: July 2019