Sit down with your relative to talk through the following checklist – equity release is a lifetime commitment and it’s vital to make an informed decision.
If you wish to download this checklist, please scroll down to the foot of the page and click on our PDF link.
- Encourage them to think carefully about all the other ways cash for care could be raised – including property downsizing, using savings, renting a room, local authority funding and possible benefits, such as the attendance allowance – before making a decision about equity release.
- Choose a provider that is a member of the Equity Release Council (ERC) as they will have to abide by a Code of Conduct, and their plan will have a No Negative Equity Guarantee (NNEG). This guarantees that the total sum payable (borrowed plus interest) will not exceed the ultimate sale value of the property.
- It is vital that your relative seeks advice from an independent financial adviser (IFA) before making a decision. For more advice on finding an IFA, see this page on the Which? website or go to the Society of Later Life Advisers. Step Change is a charity-operated service offering free advice on equity release.
- Will the provider let your relative transfer their plan to another property, should they wish to move or downsize?
- Is there an early repayment charge should your relative want to pay off the plan early (for example, if they go into a care home or sheltered housing)? Penalties for early repayment can be high, so it’s important to be aware of what these are.
- Does your relative want a lump sum or an income? Equity release schemes are most suitable for borrowing money long-term – they are not suitable for short-term borrowing.
- Don’t borrow any more than is needed. Interest rates tend to be high and can really add up over time.
- Does your relative claim benefits? Or might they in the future? Releasing equity as cash could affect their entitlement to means-tested benefits, such as Pension Credit.
- Are property values likely to increase or decrease? Falling prices will not adversely affect your relative if they have a home reversion plan, but this could affect them severely with a lifetime mortgage.
- There will be additional costs involved in ‘arranging’ an equity release – for example, solicitor, valuation and administrative fees. Enquire about these up front so you know what to expect.
- Does your relative want to leave any money in a will for relatives, grandchildren? If they release equity on their home, then the amount they have in their estate will be reduced.
- If necessary, will your relative be allowed to have other people live with them (such as live-in carers or family members)? Some home reversion schemes may have conditions to prevent this.
- Useful organisations and websites for contact details of relevant support groups.
Page last reviewed: February 2017
Next review due: July 2018