A guide to home equity release

The continued rise in the housing market has contributed enormously to the rise of the home equity release scheme. Why? Quite simply, for those pensioners who are have a large equity in their property or homeowners who own their property outright, there is potentially a large sum of money just waiting to be unlocked either to provide a regular income or to spend on how the homeowner sees fit. In the current climate, it is fair to say that some pensioner’s disposable incomes are lower because pensions have not kept up with inflation and private or company pensions are less than previously envisaged.

What is the home equity release scheme?

Most such schemes work on the basis that the lender will provide the homeowner a monthly income or a lump sum provided there is sufficient equity in the property and you continue to reside in the home. Upon the homeowner's death or if you sell your property to move into a nursing home, the loan company will recover its share or all of the property. Although not guaranteed, the Home Equity Release Loan Company will usually benefit provided you live to your expected life expectancy because of the rising housing market.

As with any home equity schemes, there are advantages, disadvantages and of course other alternatives to consider. The main disadvantages are that it is unlikely that your family will benefit from any inheritance, any partner would be forced to find alternative accommodation and there is the possibility of losing applicable means tested benefits.

For impartial advice consider consulting an Independent Financial Advisor or visiting the charity Age Concern. http://www.ageconcern.org.uk/