What Are The Risks With Equity Release Schemes?
The biggest argument against releasing equity from your property is the fact that it will erode the inheritance due to any beneficiaries. However, by taking professional equity release advice, this can be minimised by taking up the correct recommendation on which equity release scheme is best for your circumstances. This can be based on the initial amount released, the type of plan & whether repayments are to be made or not.
Equity release is designed to run for the rest of your life & therefore not over the short term. Therefore, should any plan be repaid early there can be early repayment charges applied to the redemption figure which can be upto 25% of the amount outstanding. Therefore, it should only be applied for once all other possibilities of releasing equity have been considered.
Again, before taking a release of equity & by ensuring specialist advice is taken, it can help stop mistakes being taken that could cost in the long run. Take for example means tested state benefits. Should equity release be taken & assessment be found there are more than £10,000 as a consequence, then certain benefits such as pension credit be reduced or even stopped. Therefore, following advice & selecting a lower initial amount via lifetime drawdown plans can mitigate the risks.