Equity release is a frequent choice by people in retirement to ensure they have a regular income available to them. Equity release providers ‘release’ equity from an asset, most often a home, in order to pay the borrower a lump sum or regular income over other years. Once the borrower dies or after an agreed amount of time, the asset is often sold to repay the lenders. Equity release does however come under some scrutiny from those who feel that it is not a moral product.

One of the most often-criticised aspects of equity release is that the borrower’s home is sold after their death to repay the company. There are several reasons why this is seen as immoral; perhaps the most common being that it means the family home is no longer available to family members or benefactors of the will. For financial or sentimental reasons, families often like to keep a home within the family circle and equity release takes away this possibility.

Another reason that equity release is sometimes seen as immoral is also related to inheritance. It reduces the assets that the customer has to bequeath to family members, as the money is repaid through the sale of the home. If a person is entitled to benefits, equity release can also lower the amount they are entitled to or even make them ineligible to claim altogether, which is also a downside to equity release. Issues such as the sale of the home or wishing to change equity release schemes are also called into question, as such processes can be difficult or impossible.

While there are aspects of equity release that are sometimes criticised, there remain many reasons why it is an excellent choice for many people. Equity release is a popular option to create a source of income, which is especially helpful for those who may not have any other financial plan for retirement. The borrower is also spared the upheaval of having to leave their home as another positive aspect of equity release is that the borrower is able to stay in their home.

Although there is a small amount of disapproval of equity release, the fact remains that many people still choose to take the opportunity to release cash from their homes every year. As long as the borrower is aware of any potential downsides, it is an excellent way to take advantage of the equity available in their homes.

With so many different equity release schemes on the market, it’s important to seek expert advice!