Should You Recommend Equity Release to Your Parents?

There’s nothing worse than watching parents struggle during retirement, but luckily, there are some fantastic lifelines for many older folks in the UK. With 74% of retirees owning homes, equity release could be the perfect way to help your parents live a comfortable retirement.

Whether your parents have approached you on the matter or you’re looking for ways to assist, you’ll want to have as much knowledge to help them find the best possible retirement solutions. Jason Stubbs, the equity release expert from EveryInvestor, unpacks the world of equity release to help you determine if it’s the best option for your folks.

Wondering how much equity is tied into your parents’ property? You can get a free equity release quote through EveryInvestor.

What is Equity Release?

Equity release is a financial product designed for older homeowners to unlock the cash tied into their property. The money can be released in a drawdown facility to access when you wish, in one lump sum or a series of lump sums, or as a monthly salary spanning up to 25 years.

Your parents will have the opportunity to unlock between 20% and 60% of their property wealth depending on the age, the value of their home, and the condition of their health. What’s great about equity release is that no payments are necessary unless your parents have the means and wish to cover the monthly interest and some of the loan annually. Instead, the loan and compound interest are covered from the sale of the home in question when your parents eventually pass away or move to long-term care.

How Does Equity Release Impact You & Your Family Members?

One of the downsides to equity release is reducing the inheritance you and your siblings will receive. You see, instead of leaving that money to you, they will be using it to fund their retirement. So, unless there’s no other savings, you may be left with little or no inheritance when they pass on.

Fortunately, there are ways that your parents can unlock equity and protect your inheritance.

Ways to Protect Your Inheritance with Equity Release

There are two ways that your parents can protect your inheritance once releasing equity:

• Various equity release plans come with the option of inheritance protection. This will allow your parents to set aside a portion of their estate that can’t be touched by compound interest.
• The second option is to pay off the monthly interest or loan amount. Interest rates are anything from 3% to 6.8% fixed for life. So, if your parents pay these small increments monthly, the loan won’t compound. Furthermore, they can repay between 10% and 40% (lender dependent) of the loan annually, should they find the means to do so.

Is Equity Release Safe?

Yes, equity release is safe, as long as it’s unlocked through a lender that’s a member of the Equity Release Council. Their role is to protect homeowners and ensure that lenders adhere to a strict code of conduct.

What’s more, equity release is also protected by the Financial Conduct Authority (FCA).

The Expert’s Verdict

Equity release can be a brilliant financial product for your parents, and it has never been more popular or flexible. However, we can’t tell you to recommend equity release to your parents without seeking guidance from a financial advisor.

You see, everyone’s circumstances are unique, and you require financial advice to determine if equity release is the best course of action for your family. After all, you don’t want to suggest equity release only to regret it later.