Whatever the problem, equity release isn’t the answer
The most popular reasons for signing up to equity release plans are funding home improvements and treats such as exotic holidays.
The next most frequent motives are the need to pay for a divorce or buy out an ex-partner, according to new research from financial services firm Saga.
Equity release, which allows the over 60s to access the cash tied up in their homes, is becoming increasingly popular.
But whatever the reason for taking out a plan, it is not something that should be done lightly.
This type of loan should always be considered as a last resort, when all other options have been ruled out.
Yes, it allows you to get hold of cash at a time when you need it…
And it may seem very appealing because there are no repayments to be made until you sell up or die.
But that doesn’t mean equity release is good value.
In fact, the costs are far higher than most people realise.
Depending on the plan you choose, you’ll be charged interest, which rolls up – incurring interest on the interest – until it is repaid.
The other possibility is that you – or your heirs – will be expected to hand over a sizeable percentage of your home’s eventual sale price.
Either way, you, or they, can expect to repay several times more than you originally borrowed.
So before you opt for equity release, think hard about what you want the money for – and whether it really is worth it.
