Talking to your family about equity release

Equity release is a big decision, which you might want to discuss with your family as it may affect them.

When you pass away or if you go into long-term care, your lifetime mortgage will need to be repaid, usually by the sale of your home, and will leave behind less money for your loved ones.

Talking to your family could also raise new points or questions you hadn’t thought about. So, involving your family in the decision could help support you when making the choice.

If you’re considering equity release, you’ll need to talk to a financial adviser about it first. They’ll be able to look at your overall financial situation and talk through the pros and cons of equity release for you specifically, as well as answering any questions you might have.

It’s important to know that equity release doesn’t suit everyone, so your adviser should be able to tell you whether or not it’s the right option for you. It may affect your tax position and whether you can claim for certain welfare benefits. 

Once you know all the pros and cons for your particular situation, you should talk them through with your family. It’s a big decision that’ll impact them too, so it’s useful for everyone to be on the same page. 

You’ll need to obtain financial advice before proceeding with equity release and they’ll help you decide whether or not you want to apply for equity release. it’s important to consider the benefits, costs and risk before deciding whether equity release is right for you. Please refer to MoneyHelper for more information on how financial advice works, which type of adviser you might need and how to find an adviser if you don’t already have one.

Releasing equity from the value of your home, by taking out a lifetime mortgage, will always reduce the amount of money you’ll leave behind. With Aviva, you can safeguard a percentage of your home’s sale price to leave as an inheritance. We call this an inheritance guarantee, and it means a percentage of the sale price will be paid to you or someone you love if you go into long-term care, or paid to your estate when you die, subject to our terms and conditions.

Once your home has been sold for the best market price, the inheritance will be paid out. All you have to do is tell us the percentage of your property value that you want to guarantee. You’ll need to do this when you apply for your lifetime mortgage, as you won’t be able to add it later.

If you choose to have an inheritance guarantee, it’ll reduce the amount of money you can borrow, and is subject to minimum loan amounts. If you want to know more about how this is calculated, it’s a good idea to speak to your financial adviser or contact us. An inheritance guarantee could also increase the interest rate on your lifetime mortgage. 

It’s important to note that we won’t be able to apply your inheritance guarantee if you don’t stick to the terms and conditions of your lifetime mortgage, or if you decide to repay your lifetime mortgage early. 

Some lifetime mortgages let you make voluntary partial repayments (VPRs) which can help reduce the growth of the total amount you owe. As a result, this may preserve more of your home's value when the loan is repaid, which could increase the inheritance you leave behind. Whilst VPRs can be a great way to reduce the amount owed over time, it's worth considering your individual situation and whether the money could be better used elsewhere. There are many factors which could influence your decision, so it's a good idea to seek financial advice to understand what's right for you.

If your provider is a member of the Equity Release Council, they’ll need to provide a ‘no negative equity’ guarantee, which protects your family or loved ones and can make sure they won’t inherit any debt at all. You’ll never have to repay more than the money received from the sale of your property, provided that it’s sold for the best price reasonably obtainable. If your provider isn’t a member, you might not get a guarantee. 

It’s also important to remember that your family might have been expecting an inheritance. When you die and your property is sold, it might be enough to pay off the loan and interest but without much left over, and this might be disappointing for your family.

Saying yes to a lifetime mortgage is a big decision, but ultimately, it’s up to you to decide if you think it’s right for you.

If you're considering a lifetime mortgage, it's a good idea to check whether your provider is a member of the Equity Release Council. We're proud to be a member, supporting the Council's high standards and best practices across the equity release industry.

If you’re unsure as to whether your equity release provider is safe and regulated, you can check the Equity Release Councils website. 

There are a few alternatives to equity release, like:

• Budgeting
• Selling your possessions
• Downsizing
• Remortgaging
• Getting help from your family
• Getting a lodger

You can find out more about these options in our article.

If you’d rather make the decision without talking to your family, that’s fine too. It’s your home, so it’s up to you, but you’ll need to get in touch with a financial adviser so they can check if a lifetime mortgage is right for you.

If you’d like to find out more about getting your family involved in your equity release journey, you can check out our guide.