The main disadvantage of freeing up equity is that it doesn't pay you the full market value of your home. You will receive much less money than you would from selling the property on the open market, although, of course, in that situation, you would still have to find somewhere else to live. As with many products, Equity Release has its drawbacks. For example, it's a loan secured against the value of your property, meaning you'll have to repay it when you die or go into permanent care.
And the amount of the inheritance you can leave behind will be reduced. Other considerations can be found below. Since you are dealing with what is likely to be your biggest asset, your home; releasing equity is not a decision that probably needs to be made. The release of capital is safe, as it is regulated by the Financial Conduct Authority (FCA) and overseen by the Equity Release Council (ERC).
Please note that all calls are made by Key Equity Release, the UK's leading equity release specialists. You may want to consider hiring an advisor who is also a member of the Equity Release Council (learn more about the Equity Liberation Council below). For many homeowners over the age of 55, freeing up capital could be a good option to borrow money to supplement their income, pay off debt, enjoy some of life's luxuries or help their loved ones financially. Many people consider releasing capital at a later stage of life, but are not sure whether or not a capital release product will be a good fit for their situation.
An advisor who can compare capital release plans among the UK's top lenders and who could save you money as they are not tied to a particular lender. While the release of capital has become much more common and commonplace, lifetime mortgages can be complex products with disadvantages. As a general rule, you can take the money you release in a single sum, in smaller amounts over time (known as a drawdown), or as a combination of both. It won't be right for everyone, but under the right circumstances, the capital release could be used to supplement your pension income or provide a lump sum, all while you live in your home.
Any difficulties or disadvantages of freeing up your home equity should be highlighted when reviewing your options with a capital release specialist. Based on that figure, the industry claims that increases in house prices over the past year may have offset the impact of compound interest on some customers who free up shares. To make sure you understand exactly how capital release works, they stipulate that you can only apply for a loan if you receive professional financial advice and independent legal advice. Whichever path to advice you take, you'll have the opportunity to analyze your circumstances and determine if capital release is your best option.
The release of capital may seem like a good option if you want some extra money and don't want to move home.