If you’re concerned that equity release may be a mistake or affect your inheritance, then look at why it’s a great idea.
Equity release has become popular in recent years, with 70% more people between 55 and 65 remortgaging. London equity release plans have seen a spike from September 2021 to March 2022, thanks to the ease of lockdowns and people returning to everyday life.
What’s equity release, and how does it work?
Equity release is when you take a percentage of the value of your home while you still live in the house. You don’t have to sell immediately, and you can choose to receive a lump sum or smaller instalments.
You can choose from two types of equity release plans, and with the new law set in March 2022, you can repay the loan before the loan period is over.
Repaying the loan will give you a chance to remortgage if you choose to do so. John Lawson, an expert in equity release, recommends looking into the benefits.
Will You lose your inheritance?
With a lifetime equity release plan, you will not lose your inheritance. If your parents die before the loan is repaid, you will be allowed to settle the outstanding amount by any financial means.
You do not have to sell the house to cover the costs, and you will have 12 months to repay the money.
Are there any limitations on how your parents can spend the money?
No. Your parents will be able to spend the money however they choose, whether making a big purchase or investing in a small business.
Some parents give money to their children to start their investments. You do not have to fill in a log or account for what you are doing with the money you receive.
What if you would like to take over their house after they pass away?
A lifetime mortgage will allow you to pay off the remaining debt and claim the house when your parents die.
A home reversion mortgage means the house will get sold, and whatever money is left will be paid to the beneficiaries.
If the house is transferred to you, you will be able to remortgage the house.
5 reasons why your parents should release equity
Retirement can be challenging. Not everyone has a sound financial plan in place. It’s often too late to get one by the time they retire. With equity release, they will have more freedom to enjoy retirement and not feel like a burden.
1. Your Parents Can Finally Take That Long-Awaited Holiday
After years of work, your parents will be able to travel or go on an expensive holiday. There is no limit to where or how they go.
2. They Can Add the Home Improvements That They Have Always Wanted
Your parents won’t have to worry about paying back the money immediately with equity release. They can add the extra adjustments and have peace of mind that they won’t incur additional expenses.
3. They Can Help You With Your First Home Purchase
You might not qualify for a home loan, but with equity release, your parents will be able to give you a deposit to make a purchase.
If you have a small sum left to pay, your parents can help you cover the cost to repay the money sooner.
4. They Will Be Able to Assist With Education
Education has become expensive. If you wanted to go to a prestigious school, your parents could help you or your children.
5. They Will Have the Freedom to Live Out Their Retirement With Peace of Mind
Not worrying about money is a good reason for your parents to release equity. Retirement found doesn’t last, and an extra cash injection can help them be more independent.
The Next Step
Talk to your parents about their will and estate. Cover all the grounds that may involve your inheritance. Get legal advice on the best plans to consider and understand the long-term benefits.
Your parents deserve the best after years of hard work, and with an equity release plan, you can help them understand that.
