Equity Release, Remortgage, or Downsizing: Which is Best for You?

If you own a home, there are a few ways to extract value from it, and this could be desirable depending on your circumstances and the untapped value that is tied up in your property right now.

The three main routes to consider are equity release, remortgaging and downsizing, so let’s look at the pros and cons of each option and help you work out which will make the most sense for you.

What is equity release?

With equity release, you are able to borrow against the value of your home and get a lump sum payment from a lender which doesn’t have to be paid back until you die, or you are moved to sheltered accommodation.

How does equity release work and who should consider this option? This type of bundle is best suited to retired people who own their homes outright, and do not have any mortgage left to pay. You usually need to be 55 or older to be eligible for equity release, and the older you are, the more you can borrow under this type of scheme.

There are various different ways to release equity. Choose the best equity release provider if you want to fund your retirement without being limited by your pension or personal savings. It’s also a way for you to help family members by offering up some of the cash they would otherwise have to wait to inherit much later.

The downside of equity release is that while there are no monthly repayments, interest will stack up against the loan, and the size of your estate will shrink as a result.

What is remortgaging?

Lots of people remortgage regularly, as the simplest version of this involves switching from your current mortgage provider to a new one in order to get a better deal and access lower monthly repayments.

Remortgages Liverpool can be availed if you want to borrow more, and add this to the amount you have to repay. This is less popular, but does give you a way to cover the costs of things like home renovations while enjoying lower interest rates than you could get from a personal loan.

The problem with remortgaging with a view to increasing your debt burden is that you may end up paying more interest over the lifetime of the mortgage, compared with a standard loan arrangement.

Likewise you could face fees from your current provider if you want to switch and you haven’t yet completed the minimum term of your mortgage agreement.

What is downsizing?

Downsizing is a trend which sees homeowners sell their family abode once the kids have left in order to move to a smaller, more affordable property.

There are lots of reasons for doing this, with the main motivation being to capitalize on the increase in value your home has undergone over the decades.

For others, downsizing is a practical choice, as maintaining a larger house can be trickier as you get older.

The obvious issue with downsizing is it means that you aren’t able to stay in the home that you have owned for a long time, which may be an emotional uphill struggle. Equity release lets you stay in your home and still unleash money from it, which is why this can be preferable to certain borrowers.

There is also the complication of actually having to move house when you downsize, which is stressful and has its own costs to bear, including taxes, agents’ fees and more besides.

Hopefully you now have enough information to decide whether it is best for you to use equity release, remortgaging or downsizing to achieve the perfect balance for your living situation and your lifestyle.

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