Which? warns equity release no quick-fix
Consumer group, Which?, is warning pensioners that using equity release as a quick-fix for financial pressures in retirement can be dangerous.
Equity release schemes can provide a lump sum or regular payments in return for taking out a mortgage on a property, which does not have to be repaid until plan holders die or sell their property.
Interest accrues on the amount owed until the debt is redeemed.
According to Which?, some equity release products are expensive, inflexible and leave people with little or no equity in their homes.
In addition, money released in this way can leave pensioners without recourse to the means tested benefits they would otherwise be entitled to claim.
According to Philip Spiers, co-author of the Which? guide “Care Options in Retirement”, equity release might seem like the solution for any pensioners struggling to make ends meet this winter, however, he advises anyone considering a plan to be cautious and explore other options with the help of independent, professional advice.
He suggests that downsizing to a cheaper property, using existing savings, or borrowing from family who can be paid back when the property is eventually sold, could be considered.
Finally, Which? also draws attention to the fact that equity release plans approved by the Safe Home Income Plan scheme allow a plan to be transferred to a new property but few providers include sheltered housing or retirement homes among their transfer options.
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