Do you consider yourself house rich but cash poor? Would you like a greater feeling of balance and control over your spending money? Then you may well have been considering an equity release loan to redress the harmony of your cash flow. Equity release, simply put, allows homeowners to unlock the value of their property and release cash from their home, in the form of a loan, to deal with other matters. Of course, as with everything financial, it’s not as straightforward as it seems and like any loan, an equity release loan isn’t something to take on lightly. With this in mind, here are 4 IDEAL considerations prior to taking out an equity release loan.
CONSULT YOUR FINANCIAL NEEDS
The first step is the most searching and existential; ask yourself, honestly, why you need the loan, and actually if you need it at all. If you intend to use the money for home improvements or to travel the world, and you’re nearing retirement, with over 55 equity release, you don’t need to borrow the full amount in one go. It can be most prudent to borrow gradually, leaving enough space between each request for the interest not to accumulate too strongly. There is no pressure to take out the full amount all in one go, so bide your time, consider your needs, and only gain access to the sum you genuinely require.
SPEAK TO YOUR CHILDREN
Before you decide to get an equity release loan, it’s imperative that you discuss it with your children (assuming they’re adults now….no need to consult a baby about such a decision). In all seriousness though, if you intend to leave your property to them, it’s important for them to know what you intend to do and why you are doing it as it will impact the amount of their inheritance considerably.
GET EXPERT ADVICE
While it may sound like a simple transaction, if you get the wrong type of equity release loan, it can prove expensive and complicated. Remember that these loans aren’t here to help you, however they may pitch as such in their advertising. They want to make money, and get their hands on yours, so make sure you speak to a financial advisor with an equity release qualification before signing on any dotted lines. Do you due diligence thoroughly; check that the company you’re considering is a member of the Equity Release Council. This trade body exists to safeguard borrowers and members must promote a policy of ‘no negative equity’ at all costs. And that should be music to your ears.
CONSIDER DOWNSIZING FIRST
Nope, downsizing is not an admission of failure or a suggestion that you’re struggling. Instead, it’s a viable alternative to the equity release loan should you require some spending money; the excess cash made from selling your current property and moving somewhere smaller (and, by rights, cheaper) could represent a more financially savvy option than committing to a loan on the value of your current place. Just a thought.