Using equity release before the money is needed is almost always the wrong financial decision. For those looking to release the maximum possible amount of cash, releasing equity just a year ahead of when it is required is equivalent to a drop in property value of almost 5 per cent; releasing two years early is the equivalent of a fall of over 10 per cent.
Furthermore, for the majority who do not need the maximum amount, releasing money before it is required will ultimately end up costing them more in interest charges than they receive on the cash they release.
I understand that many people may be concerned about the property market and the impact that a possible fall in house prices may have on the amount that they can raise through equity release. But it is important to understand that equity release is a long-term commitment and any suggestion that people should rush into it is extremely dangerous.
For many people, equity release plays a valuable role in enhancing the quality of life in retirement, but it should only ever be considered after all other available assets and options have been considered such as maximising state benefits and pension entitlements.
Daren Carter
Managing director
In Retirement Services
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