These helpful hints will help you make the most of your equity release. These are some of the things you will need to think about if you choose this solution.
1. Avoid paying for advice
Most equity release companies charge between £500 and £2,000 for advice. You can get this for free from us.
With us, you can get expert advice from qualified advisors. You do not need to pay or commit to get help.
2. Think about all the other solutions open to you
Releasing equity from your home is a huge choice and should not be taken lightly. By considering your options you may:
- Eliminate your need to borrow, or
- Reduce the amount you need to borrow
Any reduction in the amount you release could largely reduce the long-term cost of the plan. This allows you to get better deals with more flexibility.
The most common alternatives are:
- Downsizing – selling and moving to a cheaper property
- Borrowing from family or friends
- Using existing savings/investments
- Claiming all available welfare benefits, such as pension credit
- Home improvement grants
3. Only borrow what you need
Make a detailed list of your immediate spending plans. You do not want to pay interest on money you don’t need.
You may expect to need more money in the future. ’Flexible drawdown’ plans can provide access to extra funds when needed.
This means interest is only charged on the money you have borrowed. Borrowing money over time can be far more cost effective than taking a single initial cash lump sum.
4. Think about the interest charges
If you can afford the payments, the best way to manage the cost is to pay the interest on:
- A monthly basis, or
- An annual basis
Many plans will allow you to manage the interest by:
- Monthly repayments, or
- Overpayments
If you cannot afford the full interest payment, you can still reduce the cost. You can do this by:
- Making partial repayments, or
- Overpayments
5. Do not judge a plan on the interest rate
A competitive interest rate is important. But you should also think about how your plan will meet your future needs.
Some of the questions to ask when choosing a plan are:
- Can the plan be repaid early?
- Are there any early repayment charges?
- Can you borrow additional funds in the future?
- What costs would be involved?
- Can the plan be moved to another property?
- Who will own the property?
- Is the plan regulated by the Financial Conduct Authority?
- Does the plan meet the standards set by the Equity Release Council?
Any plan you choose must:
- Meet your immediate needs and
- Be flexible enough to adapt to any life changes
6. Involve family members or a trusted friend
You do not have to do this but we recommend you discuss your plans with family.
If you decide not to involve them, you may wish to let them know that any future inheritance will either be reduced or eliminated.
If you do not involve family members then we suggest talking about your plans with a trusted friend.
It is also good to inform the executors of your estate. They may have to deal with the equity release provider when the house is sold.