Question: I have for some time considered an Equity Release Mortgage to give me additional money to use in my retirement.
At present, I manage but there are extra things that I would like to do; have a holiday, make improvements to my home and possibly change my car.
The extra money would help.
The one factor which has put me off is that it would then reduce the estate payable to my children when I die.
Can you help with my concern? Answer: An Equity Release Mortgage allows you to raise money from your house but without the obligation of making monthly mortgage payments because any interest is added to the loan.
The mortgage balance will therefore increase and the effect of paying interest on interest means that this increase can over time be quite dramatic.
The mortgage and interest are eventually repaid, from the sale of your home, when you die or need to go in to Long Term Care.
This does mean that there is less money to pass to your children and there is a risk that there may be none.
I think your concern is understandable however, I do not think it should be at the expense of your own retirement, after all you only retire once.
Ultimately you may find that if you have to go in to Long Term Care the value of your estate is reduced or lost totally in paying Care Fees.
In which case your children may end up with nothing anyway and you have deprived yourself during your retirement for nothing.
The financial position of your children may have a bearing.
If they are secure then even more reason for considering an Equity Release and looking out for you.
In this instance I am sure your children would agree.
If they are not secure then even more reason to try and support them via an Inheritance.
But equally, given my comments about paying for Long Term Care, you could consider an Equity Release Mortgage and gift some of the money realised to them now, probably at a time when they need it the most.
At least you know they have then had something and you can then get on with the holiday, home improvement, and possibly a change your car.
Alternatively you could consider downsizing which could raise additional money but without the need to borrow.
Finally, an Equity Release could affect you entitlement to means tested benefits and as always please get independent financial advice.
Please note: answers are given for general guidance only and specific advice should be taken before acting on any of the suggestions made.