An equity release loan is a loan taken against the equity or value of a property. Thousands of people around the UK are home owners but do not have a sufficient income to support them during their retirement. An equity release loan allows such people to free up some of the equity tied into their property and use it either to boost their regular income or for a one off financial boost.
Equity release schemes have proved to be very popular as an increasing number of people opt for them. However, it is important to understand all the equity release pros and cons before taking a loan against your property. In order to do this, it is important to seek the advice of an independent financial expert who can provide objective advice about whether equity release is the right option for you.
One of the reasons people hesitate to opt for an equity release loan is that it could affect their means tested benefits such as pension credits, council tax benefits, or help with costs of care. People opt for pension equity release to supplement their income during retirement, but if getting one means losing your pension credits, it sort of defeats the entire purpose of getting one!
Releasing equity from your home may affect some means tested benefits, especially council tax benefits and pension credits; however, this is very much a matter of individual circumstances. In any case, only means tested benefits could be affected by an equity release loan, and not other benefits such as disability allowance or carers’ allowance.
It is worth mentioning here that there are two types of equity release loans – the more common type which is taken in regular installments and one which is taken as a lump sum. Loans which are taken for one off goals such as a holiday, home improvement works, etc. do not affect means tested benefits as they do not affect the overall income of the claimant.
In order to check whether taking out an equity release loan will affect your eligibility to claim pension credits or other forms of means tested benefits, it is important to consult an independent financial adviser who has expertise in the field of equity release schemes. This will help you understand whether an equity release loan is the right choice for you.