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Downsizing or equity release – which is the best option for you?

There are many reasons that you might be considering releasing some of the equity in your home. It could be that you are feeling the pinch because the value of your pension has decreased, you might want to offer financial help to younger family members or you may just be after extra cash to help you enjoy your retirement.

Carrying a large amount of equity in your home may well feel like a waste of precious funds. If you are looking to release some of that equity, especially if you have paid off your mortgage, you have two main options to consider: downsizing, where you move to a cheaper, and usually smaller, property or equity release, where you enter into an agreement with a lender to borrow money against the value of your property, that will be paid off when you either die or enter a long-term care facility.

We look at the pros and cons of both downsizing and equity release in order to help you decide which is the best option for you.

How much money will I generate?

The amount of money you generate through either downsizing or equity release will depend on a number of factors. With equity release, you will receive more money for a more valuable property and if you are older, because the finance company will have to wait less time before repayment. When it comes to downsizing you will have to do some careful research to work out how much smaller or cheaper your new property will need to be before you raise the amount of capital that you want.

What are the initial and long-term costs?

If you choose to downsize, your initial costs may be higher but your long-term costs will be negligible. You will also have the added advantage of having a property to leave to your loved ones in your will. The initial costs for equity release are fixed and, although significant, unlikely to be as high as the combined costs of moving house. Equity release, however, can become expensive with interest payments over time and the amount of money you can leave in your will may be small. In the long run, equity release works out to be financially more expensive because it gives you the added advantage of remaining in your own home.

How do I know which decision is right for me?

There are, of course, emotional considerations with both downsizing and equity release. It can be a huge wrench to move away from the family home and there is no guarantee that you will be as happy in a smaller property. If you go for equity release, however, you might find it equally emotional and more worrying, especially if you worked hard to pay your mortgage off in the first place.

A quick solution

You may well have a good reason for the quick release of funds from your home. As property sales and equity release agreements can take time, you might want to consider the slightly different option of using a cash house buyer such as Quick Buyers. A cash property buyer will purchase your home for cash without any of the usual time-consuming hassles like estate agents, mortgage agreements and non-committal buyers. Get in touch today if you have any questions about our Quick Release cash buyer service.