Are your parents thinking of getting Equity Release?

Are your parents thinking of getting Equity Release?

Almost everything written about Equity Release has been written from the perspective of the person thinking of taking out the plan. However, if the potential Equity Release holder has a family, then there can be repercussions for them.


Just what kind of things should you be aware of, or should ask, if your parents or grandparents say they are thinking of getting an Equity Release plan?


  • It might be stating the obvious, but parents and grandparents are adults and as such they have the right to do as they wish with their own money and property. That said, it is standard practice for advisers to discuss family circumstances with an applicant and, if it has been made clear that they do not want the rest of the family involved, it is something that will be noted and signed by the applicants as being their express wish.


    At the other end of the scale, family members can be very actively involved.


    Data protection rules apply to everyone and in order for anyone to discuss or request information about an Equity Release application, then the applicants need to give their permission to do so.


    If a company or person fails to comply with this, then they are breaking the law.


    Data protection rules apply to everyone and in order for anyone to discuss or request information about an Equity Release application, then the applicants need to give their permission to do so.

  • The first question that is nearly always asked by the family is why?

    The one definite consequence for a family of an Equity Release plan-holder is that the size of any inheritance will be diminished. Unless property prices rise in such a way that they always cancel out the increasing debt being built up within the plan. Mathematically possible, but extremely unlikely.


    Currently, rates around 3% mean house increases of 1% keep pace with Equity Release debt.


    Although the idea of diminished inheritance may not be very well received initially; many forget that parents and grandparents bought a house for perhaps £30k and now it is worth £300k. They will still end up with far more than the original purchase price.


  • One of the most difficult situations arises when the proposed Equity Release money is used for the benefit of one member of the family while disproportionately disadvantaging others.

    It may well be that an Equity Release plan with interest paying options can be useful. The debt stays the same so the sibling has just had an advance on their inheritance. When it is time to divide any inheritance the amount they have taken is just deducted from what otherwise would have been their share.

  • Be Open Minded

    Try to read up on Equity Release from sources that do not have a positive or negative agenda and, if possible together with your parents or grandparents, read all the small print in the Equity Release plan they are considering.


    Talk to a qualified independent adviser who should take you through the pros and cons of Equity Release.


    They have a duty to provide suitable advice and not necessarily just go for a sale.

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