3 vital reasons to work with an expert when considering equity release

When you begin making your comprehensive financial plan, with the help of your planner, you could find you don’t have enough to sustain the lifestyle you want in the coming decades.

Indeed, while you may have saved diligently into your pension pot over the years, the worry of long-term inflation could make you feel concerned about your financial stability.

One popular option for those wishing to boost their annual income is equity release. Equity release allows you to liquidate capital held in your home, and use it to help fund your lifestyle until you pass away.

If the cost of living crisis is pushing you to consider equity release, you aren’t alone. According to FTAdviser, during the first half of 2022, homeowners released £3.16 billion in equity – putting the amount released on track to beat last year’s record of £4.8 billion.

While this can be a fantastic option for those in need of additional funds in the coming years, equity release can be a complex process. If you aren’t aware of the risks, you could inadvertently call your financial stability into question.

So, here are three vital reasons to work with a financial expert when considering equity release.

1. Equity release will affect your children’s inheritance

You may be interested in releasing equity from your home in order to provide further opportunities for your children and grandchildren.

Using the cash you receive in an equity release agreement, you could:

• Help children onto the property ladder
• Pay school or university fees
• Help fund your children’s lives when they start at the bottom of the career ladder.

Providing these amazing gifts can be very rewarding, but in turn, it could lessen the amount your children will receive when you pass away.

Both forms of equity release, home reversion and a lifetime mortgage, require repayment on the sale of your home, or when you die. Whereas home reversion requires a lump sum repayment of the equity release value, a lifetime mortgage accrues interest that is then repaid, in addition to its original value, when your home is sold or if you pass away.

Whereas your children may have inherited the entire property and divided its value between them, if you release equity now, your estate will pay the sum back in the years to come.

So, when considering equity release, it is important to note that releasing equity will affect the value of your estate, and should be factored into the will-writing process. Working with a financial planner can help ensure you and your beneficiaries are aware of how releasing equity will affect an inheritance.

2. Releasing equity could incur fees you aren’t aware of

When you release capital from your home, there could be consequences and costs involved that you simply aren’t aware of.

Indeed, the Telegraph reports that equity release customers could face up to £20,000 in unknown fees, including being unable to transfer a “portable” loan to a smaller property in some cases, or unclear penalties.

Working with a professional can help mitigate the chance of undertaking a deal with unclear costs or unnecessary risks. We can review any loans you wish to take out before you sign the dotted line, to ensure you are fully prepared for any costs it might incur down the line.

3. A financial planner can factor an equity release loan into your wider financial plan

As you approach retirement, it is crucial to have a comprehensive financial plan in place. Knowing how much is “enough” to live on until you pass away, while achieving the goals most important to you, can provide invaluable peace of mind.

If you plan to release equity from your home to boost your cash wealth for the remainder of your life, your financial planner can help. Using precise cashflow modelling software, we can help determine how much you might need, and how this move may affect the value of your estate when you pass away.

Working with us can help ensure you aren’t over- or under-borrowing at this stage in your life. We can advise on the differences between home reversion and a lifetime mortgage, so you can make a fully informed decision about your own financial future.

Ultimately, your financial planner can answer any questions, address your concerns, and enable you to make a confident decision about releasing equity from your property.

Get in touch

Releasing equity from your home is a decision that shouldn’t be taken lightly. For constructive guidance on equity release, or any other financial matter, email enquiries@prosserknowles.co.uk or click here to request a callback from one of our advisers.

Please note

Equity Release will reduce the value of your estate and can affect your eligibility for means-tested benefits.

This article is no substitute for financial advice and should not be treated as such. To determine the best course of action for your individual circumstances, please contact us.