Equity release plans are an appealing option for many people looking to release cash from their property, but where do you stand if you are in receipt of benefits? The majority of benefits are means-tested against your work status, income and amount of savings, so equity release could very well impact your benefit entitlement.
If you are considering equity release, it is best to use the weighing scale method for the pros and cons. If your benefits are significantly affected, you must consider this before making your decision.
How Equity Release Changes your Financial Situation
If you receive benefits, you must inform the Department for Work and Pensions or your local council about any extra money you receive, including equity release funds. If your equity release funds are going straight to pay off your mortgage or loan, your benefits may not be affected. Otherwise, an extra lump sum of cash in your bank will require an adjustment and review of your benefit entitlement. If the money is considered savings, it will definitely affect your claim.
If you plan to use your equity release funds to pay off your existing mortgage, that means your monthly mortgage payments will no longer come out of your account. Therefore your financial commitments will be significantly reduced. This could also impact your benefits entitlement.
Speak with an equity release specialist, such as Equity Release Brokers, for advice on your specific situation to ensure you are fully informed before you make a decision regarding equity release.
The Benefits that Could be Affected
Many people opting for equity release are at or approaching retirement age, so you may wonder if your pension will be affected. The good news is that everybody is entitled to a pension, so this will not make a difference. It is worth noting, though, that pension credits are means-tested and could be affected. Council tax reduction entitlement may also change.
If you receive a disability benefit, this does not consider capital or income and, therefore, would not be affected by equity release funds. Universal credit, however, is means-tested, and any income must be declared. To ensure you are not committing a form of benefit fraud, known as ‘deprivation of assets’, you should consult an equity release professional. It can be a complex matter, as what you do with your equity cash can determine if your benefits will be impacted. Before proceeding, you should talk to a trained equity release advisor.
Contact Equity Release Brokers to discuss your equity release options on 01277 620083.