Taking out equity release is a much simpler way of borrowing money than by using a traditional, ‘residential’ mortgage. (These are also available for older borrowers in the form of Retirement Interest Only (RIO) mortgages.
That’s because equity release lenders only consider the age of the youngest homeowner, where you live and the value of your property when deciding how much they will lend you. They don’t take into account your income or outgoings, or aren’t overly concerned by your credit history, so the process is much simpler and quicker.
The main downside of equity release is that it is likely to reduce the value of your estate that you leave to your loved ones. This is because you have the option of not making any monthly repayments. If you take this option, then the interest accruing on your plan will ‘compound’ over time. For example, you borrow £100,000 at an interest rate of 4%. After year one, you owe £104,000. At the end of year two you owe 4% of £104,000 – £108,160 etc. After 18 years, the amount to be repaid will have doubled to £202,581.