The Benefits Of Equity Release Schemes

There are numerous plans and schemes out there when it comes to equity release. Some schemes offer a lump sum, tax free cash payment whereas some plans will offer a steady, fixed income over a set period of time. Whatever the payment structure, they all offer work on the same principal in which the funds locked up in the value of your property are borrowed to you and reclaimed from the lender when you pass away. It is because of this that equity release is quite popular with pensioners who do not wish to leave the entire value of their property to their heirs or in more common cases, have no children to leave their estate to.

There are many benefits (and some pit falls) when it comes to equity release. Below we will discuss a few of them.

The most common benefit, and often the reason individuals participate in an equity release scheme in the first place are the financial benefits. The lump sum cash payment or month to month income (annuity) can offer some welcomed funding, particularly during retirement. The other major benefit is tax related. By taking out some of the equity held within your property before you pass away, you limit the amount of inheritance tax due on the value of your estate. There is also no tax to be paid on the funds generated from the equity release itself. Finally, it is well known that the elderly require significant medical care which can often become expensive. Most pensions do not have the capacity to cover health care and as a result, many pensioners turn to equity release in order to generate the funds required.

Of course, with all schemes of this nature, there are some disadvantages. Although with that said, most of the disadvantages come as a direct result of the above, for example an overall lower estate value after your death.