What is an Equity Release Scheme and Should I Use One?

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If you are an aging home owner then you might be worried about having enough funds to support yourself during retirement. One way that elderly home owners alleviate this concern in Ireland is through something called equity release. Utilizing an Equity Release Scheme will allow a home owner to release some of the value of their home without having to sell their home or make payments in their lifetime. Usually equity release schemes have certain conditions such as requiring a home owner to reach a certain age before being able to take advantage of it as well as not having an existing mortgage on their home and owning it outright. But is an Equity Release Scheme something you should take advantage? We will explain the risks and benefits surrounding Equity Release Schemes so that you can decide for yourself if taking advantage of one is worth it.

Why Should you use an Equity Release?

Equity releases are often used to raise some cash in the form of a lump sum, or create regular payments for a home owner who has retired. Home owners who use equity releases for these reasons usually do not want to sell their home and live somewhere else, and are not worried about passing the value of their home onto their offspring or other beneficiaries.

However, using an equity release scheme for something like investments may not be a great idea, especially if they are risky. You could lose all the money that you invest, and even if you make a return it may not be enough to cover the costs of using the scheme.

Some home owners also think to use an equity release scheme as a way to ascertain funding to pay for nursing care at home. Fortunately, if you are trying to get money for nursing care there is an alternative called the Health Service Executive Nursing Home Support Scheme. This scheme allows home owners to receive state benefits that they can repay once their estate is settled. This means you may not need to rely on an equity release to pay for nursing home care, and you should do some research on this alternate scheme to see if you qualify.

What are the Risks?

An equity release scheme is something that can become risky if you are not careful. You should never forget that by using an equity release scheme you are losing equity in your home, equity that you may want later. If you lose too much equity you may find it difficult to pass the value of your home onto your descendants, if that is something you desire to do in the future. Because of this you may want to consider these alternatives before looking into equity release:

  • Selling your home and moving to one that is less expensive
  • Getting a new type of mortgage if you can afford the payments
  • Renting out a room or multiple rooms in your home
  • Transferring ownership to a family member in return for the cash you need and the right to live in the property for life