Why homeowners shouldn’t disregard equity release

Published: 22/03/2013

Whist an increasing number of homeowners are recognising the benefits of equity release, there continues to be a general caginess about the funding scheme.

Equity release allows a homeowner to unlock funds tied up in the value of their property whilst retaining the right to live there. The initial sum borrowed plus interest (charged at a fixed rate for the life of the term) is then payable after the last of the homeowner(s) passes away or moves into permanent residential care.

But with much focus on the high cost of care home fees and a reliance on inheritance from the next generation, homeowners understandably are driven by an overriding fear to protect the value of their property - even if in deciding to do so they suffer a reduced standard of living.

According the Office of National Statistics (ONS) 35 per cent of retirees are in ‘fuel poverty’. In addition to this a study by Key Retirement Solutions revealed almost a fifth of pensioners are facing a debt-ridden retirement; 18 per cent will start retirement with an outstanding mortgage while 17 per cent have unpaid credit cards and 16 per cent are still paying off a personal loan.

A primary concern surrounding equity release is its impact on legacy. However a study by Aviva has revealed potentially-affected family members are more concerned about their parents and grandparents having a comfortable retirement than their own future inheritance; 76 per cent of those surveyed are “happy for their parents or grandparents to use equity release to help fund their retirement”.

Richard Espley is the Head of Equity Release at Goldsmith Williams:

“With retirees facing poorer than expected returns on pensions and annuities, the Great British taboo of discussing money is increasingly hurting pensioners and denying them the comfortable retirement they deserve.

“We are keen to help retirees understand all the options available to them and openly encourage them to talk to their families about these choices and involve them in their decision making process.

“While equity release is not a universal solution, for some it can be a valuable funding tool. It allows them to turn the potentially dormant capital in their homes into cash without having to move and help them get the most out of their retirement years.”

Content correct at time of publication