Should you take equity out of your property?

NOT everyone is lucky enough to have a good pension — but there are options available to boost your retirement income. Anyone who owns a home has likely seen substantial increases in its value. While tapping into this equity is not an ideal solution, it is one way for retirees to boost income.

The cheapest solution is to downsize — sell up and move to a cheaper property — and pocket the difference. The downside of this is the cost of moving and the fees involved, including stamp duty.

It may also mean leaving an area you’re happy and familiar with — you may have to move away from friends and family and any services you use.

A second option is unlocking the cash in your house by taking out a lifetime mortgage. This is called equity release.

The loan company you use will give you a large sum of cash upfront or — just like a pension — you can take large chunks every few years.

With this, you don’t have to repay any of the cash borrowed or the interest on the loan until you die or go into care. So you can stay in your home and not worry about the debts.

The huge negative is that the size of the debt can double in ten years because you never repay any interest.

On top of this, it means that, when you die, it could severely reduce the size of your estate, losing your family a substantial part of the inheritance you may have had planned for them.

If you do think this option is for you, consult an independent financial adviser.