Equity Release vs. Downsizing

Published: 16/09/2011

In the chilly financial climate, more and more over 55s are turning to their properties for funding. The most familiar option is downsizing but with equity release plans becoming more readily available, does downsizing remain the most viable choice?

While it was always common for parents to downsize in later life - the idea of rattling around the family home minus the children fuelling that ‘empty nest syndrome’ – for many, downsizing is no longer a choice. With savings taking a constant battering from rising inflation, the cost of living continuing to reach new heights and the uncertainty surrounding future personal and State pensions, many people find themselves nearing retirement with little to their name other than their house.

While downsizing may be practical, it can be an emotional wrench especially when your hand is forced, and now, according to research conducted by Safe Home Income Plans (SHIP), downsizing could even leave people financially worse off.

Following a review of 25 local authorities with a significant population of over 55s, SHIP have showed almost a third of those who downsize “would either be worse off or unable to release sufficient funds to make it worthwhile once costs are taken into account.”¹

The research suggests those in Herefordshire and Poole could benefit the least from downsizing and could potentially make a loss of £42,949 and £39,725 respectively.¹ Equity release could therefore be a more suitable option financially, as well as having the added benefit of allowing you to remain in the family home.

Andrea Rozario is the Director General at SHIP. She said:

“[the decision of how to release equity from the home depends] on each individual’s financial situation and preferences.”¹

Richard Espley, Head of Equity Release at Goldsmith Williams, agrees:

“Using your property as a source of income is a serious decision and one that should not be entered into lightly. Before taking out an equity release plan, it is essential to get specialist advice, from both financial and legal advisers.”

The equity release team, GWLifetime, at Goldsmith Williams are legal specialists and can explain the legal nature, implications and effects of an equity release plan.

To find out more, please call the team on 0845 373 3737.

Source
¹IFA Online (Sep 2011)

Content correct at time of publication