Equity release schemes have been the victim of some really negative press. In reality, however, they have some real advantages for those who are retired.

As with any financial product, equity release has its advantages and its disadvantages and the only way you can be sure that it’s the right product for you is to research fully before making any decisions.

How Do Equity Release Schemes Work?
There are two main types of equity release schemes. There are equity release mortgages and home reversion equity release schemes. With the former, you essentially take a loan secured against the equity in your home and upon your death, or your moving to another home, your house is sold to repay the loan. With home reversion, you sell your house or part of it to an equity release provider in exchange for a lump sum, monthly payments or a combination of the two. Upon your death or moving to another home, the provider will sell the home to recover the money.

Advantages of Home Equity Release Schemes
The main advantage is, of course, the ability to free some equity. With continually falling annuity rates and much tighter retirement finances, for some people, releasing equity from their home is their only realistic option.

In addition to this, it enables you to continue to live in your home as well.

Disadvantages of Home Equity Release Schemes
The disadvantage of the schemes, and the main reason they attract such negative press, is the fact that, upon your death or moving into a care home, your home does not remain in your family. It is sold by the provider to recoup the equity you took from it (and, of course, their profit). For people with emotional attachments to their family homes, these schemes could simply be unsuitable for that reason.

However, the reality of the matter is that retirees have often worked years and years to build up equity in their home, some with the intention of using this as a means of financial support throughout retirement.

Providing the products are fully researched before a decision is taken and all the pros and cons are fully considered, equity release is a real solution to tight retirement finances for many.