Pros and Cons of Equity Release

A record-breaking number of equity release plans were taken out by homeowners aged 55 plus this year.

According to the latest figures released by the Equity Release Council, 13,452 new equity release plans were taken out between July and September. This marks the first time new equity release customers have surpassed 13,000, smashing the previous record of 12,891 from October to December 2018. This is also an impressive 8% increase from the 12,485 plans which were taken out this April to June.

To read the full report, follow this link: Q3 2022 equity release market statistics | Equity Release Council

With interest in equity release on the rise again, we at Justizia have put together a quick overview of the main pros and cons of equity release to keep you informed. As always, we recommend you speak to a financial adviser before making a decision. 

To recap

Equity release is a type of mortgage for over 55s that lets you release equity (cash) from your home.

Lifetime mortgages are the most common equity release plan. This is a loan secured against your property that has to be repaid from its sale when you die, or if you have to move permanently into a care home.

You can also get home reversion plans. This is when you sell all or part of your home in return for a cash lump sum, a regular income, or both. You can carry on living in your home rent-free until you die or move out, but your home, or the part of it you sell, will belong to someone else. For the sake of this blog, we’ll be focusing on lifetime mortgages.

Lifetime mortgages can also be split into two: lump sum and drawdown lifetime mortgages.

Drawdown mortgages, where you take cash up to an agreed amount as and when you need it, with interest only added to money you’ve drawn down, is traditionally the most popular form of lifetime mortgage.

However, for the first time since the beginning of 2009, lump sum lifetime mortgages, where you take out the cash in one go, were more popular than the usual favourite, drawdown plans. 

Between April and June 2022, 54% of customers opted for a lump sum plan. A percentage the cost-of-living crisis no doubt had a hand in. 

What are the pros?

What are the cons?

The equity release market saw 25,519 active customers between July and September this year (Property Industry Eye). If you’re thinking about joining the thousands of people turning to equity release, make sure you fully understand the benefits and risks. And remember, you should seek professional financial advice before making a decision.

This content is for informational purposes only and does not constitute legal, financial or professional advice. The information provided is of a general nature and should not be relied on or treated as a substitute for specific advice relevant to particular circumstances and is not intended to be relied upon by you in making (or refraining from making) any specific decisions.

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