Releasing equity is not a decision to be taken lightly, but can be a viable option for some people looking to use their biggest asset to supplement income in retirement. 

It does however, depend on an individual’s circumstances and that is why Help the Aged urges anyone considering equity release to seek independent, specialist and whole of market advice.  First off, people need to consider all the alternatives such as using existing savings or downsizing.

Existing savings should be called upon before considering equity release as again, it is more expensive to borrow funds when compared against investment returns currently available.  Assuming you do not want to move, before proceeding with equity release, consult and discuss the plans with your family.  They may be able to suggest alternatives and it could help avoid any unnecessary “surprises” down the line.

If your income is low, ensure you are receiving your full entitlement to state means tested benefits and, look into the possibility of local authority grants if essential home repairs are required.

With over 25 equity release providers, each offering products with different rates and fee structures, it will be difficult for you to pinpoint the most suitable scheme yourself.  Many are only available through authorised intermediaries, so find an independent specialist in equity release advice who covers the whole of the sector. 

Your adviser should be able to advise on entitlement to welfare benefits, tax liabilities and how equity release could affect these. They should also be conversant with all aspects of long term care funding which might be relevant to you now, if not in the future.

When comparing interest rates, always pay particular attention to the APR (annual percentage rate) and not just the headline rate.  The difference can add as much as 0.5%. Make sure you take into account how frequently the interest itself is calculated.  This can be daily, monthly or annually, and the longer the period the better it is for the borrower. (The exact opposite is true for traditional loans which are repaid by monthly installments.)

You also need to ask your adviser about any fees and make sure you get value for money from whoever you do choose.  Also, only borrow what you intend to either give away or  spend.  Leaving the excess in a deposit account could cost you more money and affect entitlement to means-tested benefits.

Different equity release schemes, for example Lifetime Mortgages as opposed to Reversion Schemes, or those that offer a lump sum versus those with a “drawdown” facility are some of the other more specific options you will need to consider.  And finally, always check the “small print”  for additional fees and charges such as early redemption penalties.

Help The Aged’s Equity Release service is available on 0845 2300 820.