What specifically might you discuss with your family?
Let’s look now at some specific aspects of equity release that you might want to discuss with your family:
Your other options
An important part of the equity release process is looking at whether other ways to raise the money you need are available. Equity release can be an expensive way to borrow money, so another option to access funds may work out better.
Along with your equity release adviser, family members may be able to identify ways to raise money to meet your needs that you may initially feel are not possible.
For example, your family may be able to lend or gift you the money you need. They might be able to help you remortgage or downsize to a less valuable property in order to release equity. Or if you need the money for home improvements, they may be willing to cover the cost in anticipation of inheriting the property when you pass away.
These are just examples, and we are in no way recommending any particular alternatives to equity release. But they do illustrate that alternatives are sometimes possible, and your family may be able to identify another way to access the cash you need.
The protections that come with equity release
Your family may initially be sceptical about equity release. They may have read about the ‘equity release horror stories’ of the 1980s before strict rules and guarantees were implemented.
We would suggest taking a look with them at the consumer protections now in place for homeowners taking out equity release from providers who are members of the Equity Release Council.
Read more: What guarantees do you get with equity release?
Issues around their inheritance
Although it’s true that taking out an equity release plan will reduce how much you leave to your loved ones, there are ways to protect some of their property-related inheritance:
- Some plans have the option of inheritance protection where some of the value of your home is ring fenced for your loved ones. Taking this option will reduce the amount you can borrow.
- All plans from Equity Release Council members come with the ‘no negative equity guarantee’. This ensures that the amount owed at the end of the plan will not exceed the value of your home, so your family won’t inherit any debt.
Alternatively, you and your loved ones may instead decide that maximising their inheritance isn’t important. For example, they may instead encourage you to unlock some of your property wealth to enjoy a more comfortable retirement. Alternatively, you may prefer them to have some money now when they need it rather than wait to leave them an inheritance.
You may feel that having open and frank discussions about these inheritance matters with your family is a good way to decide collectively what’s best for them and you. Our article on equity release and inheritance may also help.
Addressing potential problems for family you live with
If you take out a joint plan with your spouse or partner, when one of you dies or goes into long-term care, the other can continue to live in your home.
But things are different for other people who may live with you, such as a child or carer. In most circumstances, once you or both you and your spouse/partner have passed away or moved into long-term care, anyone else living with you will not be able to stay in the property.
It is therefore important that anyone living with you is aware of the situation. In fact, equity release providers may require them to confirm in writing that they will move out in these circumstances.