Have your parents or loved ones recently mentioned unlocking the equity from their home? With the industry reaching over £4b in 2021, more and more UK-based senior homeowners are turning to equity release to access funding for a stress-free retirement.
If your loved ones are next, you’ll want to help guide them through the process. Luckily, our team at SovereignBoss strives to educate our citizens on all things equity release. Here are four essential tips for assisting your family with equity release in 2022.
So, What is Equity Release?
Simply put, it’s a retirement product used to help homeowners above 55 unlock the equity in their homes while still living there. The products allow you to take only a portion of your property value. This will depend on your age, your property value, and the condition of your health.
You can either sell it below market value with a home reversion scheme, or opt for a lifetime mortgage that allows you to maintain ownership of your home, but comes with compound interest.
When you die, your home is usually sold to pay off the debt, unless your family wants to use a different source of income. Luckily, the Equity Release Council implemented a ‘no negative equity guarantee’ to ensure your family will never pay more than the final sale price, with additional debt written off.
4 Steps to Assist Your Family Members Who Are Taking Equity Release
Now that you know a little bit about equity release, you’ve started your first steps towards assisting your family members who are taking equity release. Your next step is to find out more about equity release. Luckily, John Lawson, Equity Release Expert from SovereignBoss, has covered the topic in detail at Aviva equity release review by Sovereignboss.
Here are four further steps to take:
- Chat with Your Family
With equity release being a massive, life-changing decision, your family members will be encouraged to chat with their loved ones, so we encourage you to lend an ear. However, it’s important to remember that the final decision isn’t yours. Show them that you support whatever decision they make.
2. Chat About The Benefits of Equity Release
Equity release has some incredible advantages, and it would be great for you to discuss these with your loved ones. If life has been financially challenging, equity release will offer tax-free cash, allow them to remain in their home, and no payments are required in their lifetime.
3. Consider the Potential Drawbacks of Equity Release
As much as equity release is a fantastic retirement product, it does have some major drawbacks that you, as a family, must be aware of. For example, equity release will reduce the overall value of your family’s estate as compound interest can roll up quickly. Furthermore, there are costs involved, and it impacts qualification for means-tested benefits.
Join Them at Their First Appointment with an Equity Release Financial Adviser
If your family members have decided to take the plunge and unlock the equity from their home, the first step is to meet with a financial adviser. They will receive a wealth of information as the adviser talks them through their options. Furthermore, your family members will want to ask some essential questions about equity release. By joining them for this appointment, you can show your support and help them work through all their options.
Since equity release has financial implications and it’s intended for life, it’s a decision that shouldn’t be made in haste. Therefore, getting involved in the process and lending your views where appropriate will take some of the responsibility off your loved ones.
Furthermore, since equity release could impact your inheritance, it would be great to reassure your older family members that you respect their decision to use their money to thrive.