Equity release can be a controversial subject among financial advisors. While most agree that if used correctly equity release can be useful for pensioners, critics feel that there are many risks associated with releasing the equity in your home.
The first and foremost pitfall of equity release schemes is the huge debt that is accumulated due to the rollover interest. This means that your children's inheritance is potentially at risk and the equity release loan can completely devalue your home.
There is, however, a way to protect your inheritance and still release some of the equity on your home. There are interest only equity release schemes that require lifetime monthly interest repayments, and the balance of equity on your home remains fixed.
This means that the owner pays monthly interest on the equity loan as long as they live. After they are gone, even if the loan amount is not repaid entirely, the initial equity on the home will remain untouched.
Interest only equity release schemes can be the ideal option for those who need to liquidate some of the equity on their property but also wish to keep their children's inheritance intact. Loss of family inheritance is one of the big risks associated with equity release.
Equity release is an important decision that affects not just the home owner but their children and grandchildren as well. So it's important to consider it carefully and thoroughly explore alternatives before going ahead with it.
