House prices have risen to historically high levels and the ability to draw down cash as you need it from your property using Equity Release is becoming more appealing and will in future become even more popular than it is now.
I do not like the marketing of some companies teasing you with free holidays, home improvements or a new car but used sensibly Equity Release will be of such benefit and bring such comfort to people generally around retirement age. However, you can take Equity Release as early as age 55 and as far as I know there is no upper age limit.
You can take a lump sum from time to time drawing down money as you need it. The interest on the mortgage is at a fixed rate until your death and that of your spouse or civil partner, so future rising rates should not be a concern.
You have the choice to pay the interest or simply allow the investment to roll up which I prefer. It is also attractive that the total loan with added interest on death of both you and your spouse or civil partner can be offset before calculation of Inheritance Tax. There are some great tax planning opportunities here although there are restrictions on using the money to invest in trusts and other arrangements to save Inheritance Tax. Making gifts to your chosen beneficiaries right now does not offend Government regulations.
Most of the arrangements carry a guarantee that you are never passing on any liability to your family. That is important.
I am very comfortable that this type of arrangement is different to that experienced in the 1980s as it is now much better regulated. It is essential to involve potential beneficiaries such as children to understand this. Where this has not been done claims could be made against the advisers putting forward this type of arrangement.
The income from pension funds for so many people in retirement does not give them sufficient funds and this additional boost of tax-free income as and when needed for many will be of such great benefit.
Trevor Downing FPMI FPFS
