Is equity release a good way to go?

Question:

My mum is 68 and dad is 70. They were self-employed all their working lives but also enjoyed the good times and didn’t put much away for a pension.

They’ve been retired for eight years now and don’t have much money. However, their mews house, because of its location, is worth a lot. I have a good job and don’t need their money. Should I suggest equity release to them?

Answer:

Your parents qualify on age, as the youngest homeowner needs to be 55. Equity release involves either a lifetime mortgage or a home reversion plan and will be a shared plan in the names of both your parents that will provide a tax-free cash payment, which may affect any entitlement your parents have to state benefits. The value of their estate may diminish but this doesn’t seem to concern you.

Your parents should seek out an independent financial adviser who is a member of the Equity Release Council (ERC) who will consider their personal and financial circumstances and advise whether equity release is right for them, and which is the correct product for them.

The ERC represents the providers, qualified financial advisers, lawyers, intermediaries and surveyors who work in the equity release sector and has evolved from Safe Home Income Plans (SHIP), which was established in 1991.

ERC members providing equity release products must sign up to the ERC code of conduct, which involves a number of guarantees and safeguards to protect consumers. Suggest it to your parents and see what happens.

What's your problem?

If you have a question for Fiona McNulty, email legalsolutions@standard.co.uk. We regret that questions cannot be answered individually.

Fiona is a partner in the residential real estate team at Thring LLP (www.thrings.com).

These answers can only be a very brief commentary on the issues raised and should not be relied on as legal advice. No liability is accepted for such reliance. If you have similar issues, you should obtain advice from a solicitor.