Alternatives to equity release
How does equity release work?
Pros and Cons of Equity Release
Our home reversion plans
Home & Capital Advisers
Case Studies

Pros and Cons of Equity Release


Lifetime mortgages

Pros:

  • You continue to benefit from any rise in the value of your home.
  • If you die early or leave your home to go into care, you will only have paid interest for a short time so you will maximise the value of your home.
  • If you arrange a lifetime mortgage with a SHIP member, you can never lose more than the value of your home – this is the “no negative equity” pledge.
  • A fixed rate of interest will be an advantage should interest rates rise.
  • In many cases, you can release additional cash in the future.

Cons:

  • As the mortgage increases through rolled up interest and the value of your home changes with market conditions, your net equity in the property changes daily. You cannot therefore guarantee that you can leave any of the property as an inheritance for your children.
  • If you live much longer than the normal life expectancy for your age, the equity in your home may start to decline. You could potentially end up with no equity at all.
  • If interest rates fall you could find your cost of borrowing is uncompetitive.
  • You will usually raise less money than with a home reversion.
  • You cannot be certain that you will be able to draw further funds later on, should you need to.

Home reversion plans

Pros:

  • You can usually raise more cash than under a lifetime mortgage.
  • By retaining a percentage ownership in your home, you know that you can leave it as an inheritance.
  • If you only release part of the equity you know that you are able to release further amounts in the future, capitalising on any increase in the value of your property.
  • There is no debt or new financial obligation.

Cons:

  • You will not benefit from any appreciation in the value of the proportion of the home that you sell.
  • You will no longer own all of your home.
  • As the discount at which the home reversion plan is arranged is based on your age and life expectancy, a home reversion plan will generally be poor value if you die or move into care early.

This may involve a home reversion plan or lifetime mortgage. To understand the features and risks, request a personalised illustration here.

Alternatively, please call our Enquiry Centre free on 0800 253657.