If there’s one thing in life that’s unpredictable, it’s our financial situation. One month, everything could be fine and dandy, and the next the boiler could break and your car could get scratched. There aren’t many ways that you can give yourself a lump sum to cover these costs, but an equity release is one such way.
It’s not something to bound into headfirst, however, and you have to ask yourself a number of questions first. More often than not, it’ll be a sound choice, but if you take the time to assess your situation you’ll feel all the more better for it.
So, for those who are feeling ready to release a bit of cash, you’re in the right place. The following post will hopefully give you enough information on whether the equity scheme is right for you. As always, consider your own set of circumstances – don’t let anyone else’s decision make your mind up for you.
- Are you approaching retirement age?
You have to be over 55 for most equity releases anyway, but with the pension age over 65, you’ve still a long way to go. Once you get to 60, and 62, you should start thinking about your retirement and figuring out if you have enough money to support yourself. If you don’t, an equity release may be a good idea for you. This is particularly true if you’re self-employed, as your state pension may not be enough to cover you.
Pension ages vary from person to person, so it’s important to find yours out. Whether you consult your employer or use a source like gov.uk, it’s quite simple to check when you become eligible.
- Do you have professional advice?
It’s unlikely you’ll be fully well-versed in the intricacies of an equity agreement, so seek advice. Many services, such as equityrelease.co.uk, can give you a quote which can help you make an informed decision. Like most financial choices in life, equity isn’t something to just bound headfirst into. You must take your time and consider all your options carefully.
- Do you know what you want to spend the money on?
It’d be a good idea to have a firm sense of what you want to spend the money on. Inheriting a lump sum with no idea of its use could lead you to waste it through frivolous spending. We’ve all heard those horror stories of people who blow a large sum of money, so don’t follow suit!
So, ask yourself what you need the money for. Is your bathroom wrecked? How’s the kitchen looking? Does your garden need some urgent attention? Maybe you want to help your children pay off their student loans, or take the family on holiday. Whatever your intent, be firm. It’s not like you’ll have unlimited amounts of cash, so only take it out if you have a purpose in mind.
- Are you properly settled?
Equity schemes are designed to be a lengthy commitment. So if you plan to move house, change career or take any other major step, it would be wise to avoid it for now. You could find yourself with your hands tied if you change your circumstances after having taken out an equity scheme.
- Have you paid off all or some of your mortgage?
Equity release is generally for people over the age of 55 who own a well-looked after property. The terms of your agreement will dictate the details, so enquire if you’re not sure. A feature that’s near-universal, though, is the fact that you need to have paid off most or all of your mortgage. So, don’t even think about an equity release until you’ve carved out a good chunk of that debt first.
- Is your current income enough to support your needs?
Many people use equity releases as a regular source of income. If your current income is low but your assets are valuable – i.e. if your house is worth a lot – then this is a good way to boost your salary. So, if you’re struggling to repay bills, feed your pets are maintain your car, another source of income could be at your fingertips.
- In summary
It goes without saying that you should be utterly careful with your cash. Landing yourself in trouble is usually easily avoided, but if you do find yourself in a pickle, know that there are ways around the problem.
An equity release could provide you a lump sum for your retirement, holiday or home repairs. And, just like taking out a loan, it’s not an overnight decision. More money is nice, but will it be put to good use? If you’re old enough for equity, then it may be time to start thinking about your legacy and what you’ll leave behind. Hopefully these steps helped you out, and good luck with your choice!