Equity release – we’ve all seen the adverts. But what are the facts?

Equity release has become somewhat of a buzz word recently. The adverts are all over the TV and radio stations. The concept is that if you are aged over 55 and have paid off all or most of your mortgage you can release capital and stay in your home, thus avoiding the stress of moving. In this article Eastwood Property Consulting looks at the pros and cons of equity release.

First and foremost, whilst it may be convenient, equity release isn’t cheap and can quickly erode a serious chunk of any inheritance intended for loved ones. The average interest rate for equity release as of April 2021 was 4.07%. Compare that to the average mortgage interest rate which is in the region of 2.6%, it is almost double. Many of the equity release companies trumpet that it is tax free. True, but so is selling and taking the equity out of your principal private residence. Yes, there are fees and Stamp Duty Land Tax involved in moving house but at least it avoids paying a punchy interest rate over many years!

Staying put in a house which has been inhabited for so long can also have its pitfalls. The building may be damp or in a state of disrepair, have substandard insulation, electrics or central heating. With rocketing energy costs an energy inefficient house can quickly become a millstone. Or perhaps the garden is too large and has got out of control? In these cases moving to a smaller, cheaper, warmer and energy efficient house may well be the best option.

It isn’t surprising that equity release is so popular because of the concerns about moving for elderly and vulnerable people, not to mention their families. It can be highly stressful and also completely bewildering for somebody who may not have moved house for many years. There is so much to think about; deciding on an appropriate estate agent, understanding terms (always read the small print!), fees, appointing solicitors, dealing with viewings, finding a new home, surveys, removals not to mention co-ordinating moving dates.

Well, that is enough to put anybody from moving house, let alone people in their 60s and 70s who aren’t familiar with the procedure! Eastwood Property Consulting specialises with helping elderly homeowners and their families to consider individual circumstances, work out practical solutions and put them into effect. If selling is the best way forward then I can handle the whole process from start to finish, draw the sale and purchase together, and remove all the stress and strain from the move. What’s more, as an expert negotiator, I recently saved a client over £10,000 in fees and £55,000 on their purchase price. In any case, it is always sensible to talk to a reputable independent financial adviser, such as Maurice Fermoy at responsibleadvice.co.uk who specializes in providing advice to over 55s.

In conclusion, equity release may be a solution for for those who don’t want to go through the upheaval of a move. But only if your home is set up for affordable older age living, and you aren’t concerned about leaving an inheritance. If, however, leaving a legacy is important, then equity release is a very expensive choice. Especially when down-sizing is a perfectly viable and achievable alternative. Experience gleaned over many years in the property business has taught me that the key is not to delay making these important financial decisions until it is too late.