Things to consider

As with most major purchases, it isn't a good idea to take the first deal you find when it comes to equity release products. Shop around. As well as looking at the cost, you should:

• Choose a secure provider
• Choose a flexible product
• Find out the minimum and maximum amounts you can borrow
• Find out the maximum amount you will have to repay
• Find out whether you can stay in your property as long as you want

Our checklists include some of the things you should expect your adviser to comment on, along with some key questions to ask your provider. You can even print them out and take them with you while you're shopping around.

Choose a secure provider

You should be confident that the provider you're dealing with will be around for the long-term, especially if you expect to receive a regular annual amount for your living expenses or plan to borrow more in the future. Find out who owns the business. A provider with a successful track record or a strong balance sheet may be less risky than a provider with no track record at all.

Choose a flexible product

Try to choose a product that gives you flexibility. For example, will you be able to decide whether or not to repay the equity released? And can you pay off your provider and choose a cheaper, more flexible product if one becomes available? Are there interest penalties or fees involved in paying off the first product? If so, what are they?

Find out the minimum and maximum amounts you can borrow

You might be required to draw down a minimum amount to start with, and subsequent instalments may also have minimums. The smaller those minimums are, the better subject to concerns re the Social Security Act and potential impact on state benefits (see Impact on government benefits). The provider will usually specify a maximum that you can draw down at any one time. It will often be a set proportion of the property's value, and the amount may increase as you get older.

Find out the maximum amount you will have to repay

It is possible that the maximum amount you will have to repay could exceed the value of your home in the future, particularly if the contract runs for a long time, and property prices do not appreciate in value. To avoid this situation, look for products that provide that you will never owe more than the net realisable value of your home. This provision is often referred to as a "No Negative Equity Guarantee".

Each provider is likely to have terms and conditions attached to their No Negative Equity Guarantee, so ensure you understand these before proceeding.

Find out whether you can stay in your property as long as you want

The equity release provider will have a legitimate interest in protecting its security, and will want its money back at the end of the arrangement. So, you might find the provider requires the property to be fully insured. Or, if you don't keep the property in good repair, the provider might take steps against you to protect its investment.

If you have a partner with whom you own the property, does anything happen to the equity release product when either of you die? Does the survivor have to pay it back immediately?

Are there any other circumstances in which the provider could take some action against you to enforce its security? Do you have the right to remain in your property for life? If the worst came to the worst, could you even lose your home? If so, what would have to happen before you could find yourself on the street? What default conditions exist in the contract you are being offered that could result in you being removed from your property? Make sure you get this information in writing.

Don't pay too much attention to the "rising values" story

An equity release provider may give you a picture that downplays the significance of the rising amount owing under their product. See Interest rates to see the impact of interest costs on the amount owing over long periods. The provider's picture will seem to show that you shouldn't worry too much about the compounding cost.

The "rising property values" story does not change the cost of the equity release product and is not relevant to your decision when you are comparing products or wondering whether equity release is right for you. Apart from anything else, while average prices in either the country as a whole or in your town or district, may rise, the provider cannot assure you of that in your case.

The only relevance of the "rising property values" story is that, if it happened, you may be able to take out some more money by adding to the amount that you borrowed (or "released") at the outset, or the residual equity in your house may be greater.

When you are presented with the "rising property values" story, check that the growth rate used to project the increase in property values is conservative.