Homeowners were warned today of the risks of borrowing money against their properties while still living in them.
The Financial Regulator said equity release products, such as lifetime mortgages and home reversion plans, could affect long-term care costs.
Almost four in 10 consumers aged over 50 would consider releasing equity from their homes to feel the financial benefit of having a valuable asset after paying off a modest mortgage, according to research from the regulator.
Mary O'Dea, the Regulator's consumer director, urged homeowners to look at all their options and get independent advice before using the scheme.
She warned that pensioners could be left with little money to meet their long-term needs.
"Many people have a windfall gain with an asset they have bought many years ago, never expecting it to be worth what it is today, and they are using products, like equity products, to try and get value for that asset right now," she said.
"We are saying to people: think very, very carefully before you enter into these products and make sure that they are the right product for you. And especially think of things like if you have a means-tested pension, is this going to affect the pension when you get this lump sum? How much is it going to cost you?"
Equity is the value of your home less the mortgage you owe through a lifetime mortgage or a home-reversion plan.
With lifetime mortgages, you borrow money against the value of your home and continue to live in your home making no repayments. The loan, which is usually 10 per cent to 45 per cent of its value, is usually repaid from the proceeds when your home is eventually sold.
In a home reversion plan, you agree to sell a share of your home in return for a set cash price. The price will be less than the market value of the share of your home that you sell.
The home reversion company will receive the same percentage of the proceeds from selling your home, either when you move out or after your death.
As no repayments are made on a lifetime mortgage, interest is higher than the market rate.
Homeowners borrowing €100,000 on a house could end up owing €245,000 over 15 years. The regulator warned that before committing to one of these schemes, homeowners should consider other ways of raising money from their homes, including:
- Renting out one or more rooms in the property;
- Selling the home for a cheaper one;
- Transferring ownership to a family member in return for the cash needed.
Ms O'Dea told RTÉ radio this morning: "We have seen that people are not realising how much the actual product is costing them, and people are beginning to get a little bit more concerned five or six years into the product where they actually say 'maybe I need to look a little bit further ahead'.
"When you're making decisions at 60, you're not thinking how things are going to be when you're 75."