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Equity Release

Learn More About Equity Release Options

Equity Release mortgages are not like residential mortgages. They help you secure a loan against the value of your property. In these guides we outline what makes them different, the eligibility criteria and help you decide if it’s an avenue you would like to pursue. It’s a way to free up money in your later years, but with many factors influencing the loan, it’s good to learn as much as you can from qualified mortgage professionals.

Posted On: August 20, 2021
Updated On: January 16, 2023

Is Equity Release a Good Idea? Top Pros and Cons To Consider

When it comes to releasing equity from the value of your home, there are plenty of factors that will influence your decision.

If you’re thinking of acquiring a mortgage later in life, it’s only natural that you’ll have a lot of questions. We’re listing some of the main qualms that homeowners have when it comes to equity release to help you decide if it’s a good idea, or whether you should look elsewhere to generate extra income.

Pros of Equity Release

  • It’s safe if you opt for a no-negative equity loan

A no-negative equity loan means that if the value of the loan and interest combined exceeds the value of your property, then this won’t impact your family or any of your other assets. The best way to make sure you’re acquiring a no-negative equity loan is to check that it has the Equity Release Council logo.

  • You can get a lump sum that’s tax free

If you’re in need of extra cash right now and aren’t so concerned about inheritance or using your property for future investment, then it can be the perfect financial decision for you. Being able to access a lump sum of money that’s tax free can be a great way to achieve your retirement dreams. Whether you’ve got your sights set on a world cruise or want to help your children achieve their life goals, equity release can help.

  • You can stay in your home

One of the main worries that people have when considering equity release is whether there is any risk they could lose their home. The answer to this is simple – with equity release, you have the right to live in your home as long as you like. The only reason you could fall into trouble is if you don’t abide by the terms set out in your mortgage contract, but with a reputable mortgage advisor by your side you should know what the equity release loan entails.

You can also move house too! The only catch is that your mortgage lender will have to approve of your choice of property before you can move.

Cons of Equity Release

  • You may lose some of the value of your property

Particularly if you opt for a Home Reversion Plan*, one of the main pitfalls of equity release is that you’ll only receive a percentage of your property’s market value. This could be as low as 20%, but can go up to 60%. 

  • You will pay interest

As with all mortgages, you will accrue interest on an equity release loan. This is money to factor in on top of the value of the loan itself. To avoid the interest compounding too much, it’s best to arrange regular repayments. However, if you opt for a no-negative equity mortgage you won’t have to worry about paying interest that exceeds the value of your property, but it does mean that the value of your home and land won’t be inheritable.

  • It will impact what your beneficiaries can inherit

Obviously, if you sell your home to an equity release provider or agree to pay back the loan through the sale of your property, then this asset will no longer be inheritable. If you would like to leave your property or its value to your children or other relatives, then equity release is perhaps not the best option for you.

If you’re looking for a mortgage advisor who can offer expert advice on whether equity release is a good idea for you or not, Agentis can help. Contact us today to arrange your free initial consultation.

*Please note that Agentis is unable to provide advice on home reversion plans. Equity release is not right for everyone and may reduce the value of your estate.