Pros
a. You still live in your home
An advantage of equity release is that you still live in your home even after taking the money from the provider. This reduces the stress of having to move to a less expensive house and downsizing. Since you still want to remain in the same neighbourhood and around your friends.
This is always a great option since you get enough cash to sustain you and take care of all your expenses. You still live a comfortable life you are used to without any stress of moving and downsizing.
b. Nobody monitors how you use the money
The equity release money is yours to keep and do whatever you want. Nobody monitors what you are doing with the money you get from the equity release.
You can opt to help out a family member stuck financially. You can choose to go out on vacation and enjoy the places you’ve always dreamed of visiting. If you don’t like how your home looks, you can opt to upgrade your home and have your dream house.
c. You can use the money when you want
You don’t have to ask for the whole amount at a go since you can use the drawdown lifetime mortgage. A drawdown lifetime mortgage allows you to get money from your provider when you need it and want to use.
This limits you from overspending, and you only use the money when you are in need. Additionally, interest is charged on the money that you have released; this is a great way to ensure that your interest bills don’t build up.
Cons
a. It reduces the inheritance
Getting an equity release to support you will always mean that the value of your home will depreciate and your family will have a smaller inheritance. Since a part of your home belongs to the provider, this means that your home will be sold to pay off the debt.
This always ends up costing your beneficiaries, and you live them without any assets. Be careful on the contracts you sign when asking for equity to ensure that you have secured a percentage of your home to your family.
b. You miss out on price rises
The real estate market appreciates with time, and you could miss out on the price rise.
The home reversion equity plan requires you to sell a part of your home to your provider. When your house is sold in the future, you end up losing and missing out on the price changes in the real estate market. If your family was expecting that money to help them out in a predicament, they might end up feeling frustrated.
c. Interest charges can build up
If you get a long-time loan, the interest charges end up building up to a large sum. Sometimes you might end up finding that you owe the providers more than the value of your home.
However, a reputable provider has the no negative equity release guarantee which means that you can never owe them more than the value of your home. This ensures that your family won’t have to pay unnecessary debts when you move to a nursing home or when you die. This makes sure that your family will have an easy time transitioning from everything.