Taking equity on your house..Good idea or not !!

[GROWNUPMUMOF2]

My DH and myself are in the lucky position to be mortgage free. We dont have a lot a lot of savings or large pensions so are looking at the possibility of releasing some equity on our property.Does anyone have experience of this..Is it worthwhile or are there hidden pitfalls !!

You need proper financial advice. Equity release should be a last resort (IMO) because it is an expensive way of raising money to supplement your income. You might be better off downsizing for example.

The pitfalls aren't hidden by the way, they're there in black and white if you read the contract carefully.

I think the best way to think about equity release is like a mortgage at a really high rate of interest that you don’t pay back. Since you aren’t making any payments and the interest rate is high, it compounds and the debt grows quickly.

I think it can really impact your flexibility in later life as you can’t sell up and I move to somewhere more suitable without repaying.

I’d only personally consider it if I was in a future proofed, forever home. Also if I didn’t have dc I wanted to inherit. If that is you though then go for it.

What do you want to raise cash for?

Are you both working?

How many years till you retire?

My husband is getting made redundant and we are both in our 60,s. Also on the back of another thread does anyone know if this would be classed as a Depravation of assets in the future should a care home be needed ?

If you don't have much saved or a generous pension then I'd be very nervous about MEWing.

Obviously none of us know your circumstances but I looked to future proof my situation when I retired by buying the cheapest smallest house comfortable for us, with the lowest council tax and utility bills. I feel that we live a regal life on a minuscule income. The amount of equity we released in that way has generated an income to supplement our pensions.

Anyway, in case you haven't read this:

https://www.unbiased.co.uk/discover/mortgages-property/equity-release/is-equity-release-safe-the-pros-and-cons

Selling and downsizing for your long term financial health is not “deprivation of assets” unless you gift the freed up money away to others.

Thank you for the link. I.ll have a good read through it

Regarding deprivation of assets it’s an it depends answer. If you take the money and spend it on a lavish holidays/ gifts then that could be considered deprivation of assets. Money spent on reasonable everyday living costs would not be deprivation of assets. Some councils vary in their definition of reasonable though so it can all get a bit tricky.

Can you downsize instead and buy a property more suited to your retirement?

Is moving to a cheaper property a possibility to release equity you can use to live on/as a pension supplement?

Early retirees where I live, if in good health,often take up gardening or holiday let cleaning/maintenance to gain a small top.up income. It's quite well paid now as there is a big demand especially on a Friday/Saturday.