An equity release is a financial product that enables you to release equity, i.e. cash, from your property. This is something you will be able to do if you are age 55-years-old or above. You can either take the funds in small amounts or you can access a lump sum. Some people decide to go for a mixture of both. Below, we will assess the pros and cons of an equity release to help you get a better understanding. 

What are the pros of an equity release?

Let’s start by taking a look at the advantages of an equity release. Firstly, you will be able to spend the funds how you want to. Whether you want to top up your monthly income or you want to help your child purchase their first property, you won’t be restricted in terms of using the funds. You can also select to either have a monthly top-up or take out a lump sum, so this means you can access the money in a manner that is best suited to your specific needs.

In addition to this, flexible repayments are an option. If you want to, you can either pay some or all of the interest. You can also determine how the original loan is repaid as well, meaning you can work out a repayment scheme that is right for you. Also, just because the money is taken from your home does not mean you will lose your property. You can still live there, and in most cases, moving home won’t be an issue either.

What are the cons of an equity release?

As is the case with any financial product, there are cons you need to consider as well. The interest can build up quickly especially if you opt not to repay anything until you move into full-time care or pass away. In addition to this, the level of inheritance you are able to leave to your loved ones will reduce by benefitting from an equity release.

Other cons to consider include the early repayment charge that may be implemented if you decide to repay all or a significant portion of the loan ahead of time. Higher interest rates are to be expected as well. Plus, your entitlement to benefits could be impacted if you are currently receiving any sort of benefits that are means-tested. 

As you can see, there are pros and cons associated with an equity release, and it is vital to understand this so you can make the right decision for you. One thing you need to consider is whether it makes the most sense from a financial point of view. The best thing to do is to use an equity release calculator so you can determine whether or not this is going to make economic sense.