The crunch usually comes a few years into retirement. The car needs replacing, the fridge and washing machine are on their last legs, and an overseas trip before ill health sets in would be nice...

Having to find large amounts of capital midway through retirement can be a stressful experience. One way around the problem is to sell the family home, buy something smaller, and free up some cash.

In reality though, buying smaller doesn't necessarily mean buying cheaper and by the time sale and purchase expenses are deducted the cash proceeds may be a lot less than expected. A simpler way is to free up the cash (or equity) without having to sell the house.

Home equity release schemes are proving to be very popular and many new providers are appearing on the scene following the success of Sentinel, who has the largest market share. Home equity loans aren't for everybody but for those who have no other way of escaping a miserable retirement; they are almost too good to be true.

Other options would include taking out a standard mortgage with the bank, borrowing from family members, or selling your home. However, a bank mortgage - which requires repayments to be made - may not be affordable. Family members may not be in a position to provide the money required, and selling the house for a cheaper one may not be an option if the house has a low value anyway, or if the costs or stress of moving would be too great.

A surprisingly large number of retirees have mortgages, and refinancing with a home equity loan can free up income to increase enjoyment of life. If you need funds for home improvements, such as a new roof or painting, then taking out a loan will enable you to preserve the value of your house.

Deciding whether or not to borrow for private medical treatment, a new car, travel, or other such things that will improve your quality of life involves weighing up how much sacrifice you want to make in order to preserve the value of your house as an inheritance for your children.

These days it seems that neither parents nor children have any great expectations of there being a large inheritance for future generations and that is probably how it should be.

Choosing a home equity release scheme is something that needs to be done with caution and is best done with independent financial and legal advice. Factors to consider are fees, choosing between a lump sum or regular payment, choosing between a fixed and floating interest rate, and the financial and legal risks involved.

For those who have no other option, home equity release is well worth considering - and the kids can look after themselves!

Article by Liz Koh

Ph: 0800 273 847

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