Plan is gift that keeps on giving
GIFTING is the fastest growing reason that people release equity from their homes, figures from Age Partnership show.
In the first half of this year, one in eight who took out a plan used at least some of the proceeds to help loved ones.
Equity release customers Mr and Mrs Wood were keen to use a chunk of the money they unlocked from their home to help their son buy a place of his own, rather than spend so much of his earnings on rent.
The couple, who live in Leicester, are shocked by the cost of renting a property. “It’s just money down the drain,” Mr Wood said.
The problem is that getting on the property ladder is even more expensive, especially with cautious lenders insisting that many first-time buyers put down a 20 per cent deposit. “It’s doubly difficult raising that kind of money, if you are paying rent at the same time,” Mrs Wood said.
The couple used some of the equity they released to help their son with a deposit to buy a place for himself.
Setting up an equity release scheme will deplete the size of any inheritance you are likely to leave loved ones but Mrs Wood said in this case it has allowed them to pass on property wealth at a time when their son needs it.
Andrew Morris, at Age Partnership, advises talking to all family members before releasing equity: “By using the payout to make gifts, they will benefit today rather than lose out tomorrow.”
Taking out equity release is an important decision and it makes sense to take independent financial advice.
Make sure you speak to a “whole-of-market” adviser, who can examine every product on the market before making recommendations.
They can talk you through the ins and outs, and should be able to review every plan on the market.
Also, advice must be given in a non-pressure environment.
A good adviser should also be able to talk you through other options for raising the cash, such as claiming your state benefits, downsizing or other types of lending.
Equity release is not right for everybody. You should also talk to a solicitor and any family member whose inheritance will be affected.