How do I release equity in my home?

A reader from County Down wants to know the best way to use the value of his property.

Peter McGahan, managing director of Worldwide Financial Planning offers a helping hand through the problem.

Thomas from Newtownards asks:

What is the best way to release money from your home?

Peter McGahan from Worldwide Financial Planning responds:

There are many options available to anyone wishing to release equity from their home and the best and most appropriate way will depend on your personal circumstances.

Without conducting a detailed fact find with you it would be impossible to answer. You can simply borrow some cash from your building society and this will normally be the cheapest option. The only downside is that you will have to make regular repayments of interest and if this is not the desired option you can consider a lifetime mortgage (what used to be called equity release).

Before releasing cash, consider whether or not you need the money. Is it really essential to borrow? Consider also that you should always find out about fees and grants and consider trading down before releasing cash – it may well be the cheapest option.

Consider the drawdown option if you are releasing equity. Some companies allow you to set up the scheme but borrow when you need it. This will save you a lot of interest.

Check to see what impact the equity release plan will have on your state benefits.

Use a SHIP member if you are considering equity release. The members of SHIP (Safe Home Income Plans) agree to provide a fair, simple and complete presentation of their plans.

The benefits, obligations, variables and limitations must be clearly set out in their literature, including all costs which the applicant has to bear in setting up the scheme as well as the position on moving, the tax situation and the effect of changes in house values.

Make sure you have the freedom to move to another property if needs be at a later stage.

Some plans are still being sold with standard variable rates. Be careful with these in difficult market conditions. Use an independent financial adviser (IFA) who offers you a fee option – you’ll be more confident they are acting in your best interests. Age Concern and the Financial Services Authority (FSA), the UK’s chief financial watchdog, both recommend getting independent financial advice before proceeding.

If you have a question for John or one of our team of experts go to the myfinances.co.uk Ask the Mortgage Expert section.

For more information on the issues discussed here, go to independent financial advisers Worldwide Financial Planning and SHIP.

Worldwide Financial Planning is authorised and regulated by the Financial Services Authority.