Equity Release has become a popular choice for people in need of a little extra help to fund their retirement. With longer life expectancies, the rising cost of retirement, and increasing levels of debt, people over the age of 55 need a way to access extra cash to support their desired lifestyles and a quick and easy way to do so is to tap into the wealth of their homes.
This article does not constitute advice. Professional advice should be taken prior to acting on any part of it. Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.
It has become so popular that in 2018, equity release customers borrowed £11 million a day against the value of their homes.
The Equity Release Council has divulged that last year alone 44,000 homeowners borrowed £3.9 billion – an increase in both number of borrowers and amount borrowed from 2017 which boasted 33,000 homeowners and £3.1 billion borrowed. Experts predict industry sales will soon spike to over £20 billion a year. The stats really do speak for themselves.
Why is equity release such an attractive option?
Both types of equity release products – lifetime mortgages and home reversions will allow you to spend the money you gain however you want. You’ll retain complete ownership of your property and will be able to continue living there until your death. Another great perk is that the funds you release are tax-free.
Who is using equity release?
There is indeed a quintessential equity release customer. The very basic requirements state that one needs to be at least 55 years old – about 10 years or so before most people hope to retire.
Many people might realise around that time that they haven’t adequately saved for retirement or that their pension won’t fully cover all their expenses and they need to bridge the gap somehow.
Accessing the equity in your home is practically a no-brainer, especially if you’re not concerned with leaving any assets for inheritance purposes. It can even be a useful tax planning tool if you need to reduce your estate value.
How can I use the wealth from my property?
How much you can release from your property will depend on your age, the property value, and your current health conditions. You can receive the money either through multiple payments of small amounts, in a lump sum, or even as a mix of both. But you can use the money however you see fit — renovations, travelling, or even just everyday expenses.
Be fully informed
While not exactly too good to be true, it’s important to remember that equity release is not to be entered into lightly. These types of loans carry more risk, so providers pass along the financial burden to the customer which makes these mortgages more expensive than regular mortgages.
However, most turn to equity release because they cannot secure a standard mortgage so this point is often moot. Like with any other loan, you’ll need to pay arrangement fees and confirm that your loan will allow early repayment without incurring penalties.
It’s also advisable to wait to borrow against your home until absolutely necessary — using the financial power in your property now decreases it in the future when you’re more likely to actually run out of money for retirement.
Be sure to keep an eye on the property market when your pension pot starts to run low so you can cash in at the best time. It’s also crucial to remember that if you receive state benefits, the additional cash you get from equity release may affect your claim.
Seek out the pros
When in doubt, turn to professionals for help deciding when and how to supplement your retirement funds.
If you’re still in the early stages of your career, talk to a financial advisor when you begin planning so you can enter retirement confident that your savings will provide the lifestyle you worked hard to achieve all your life.
Is equity release right for you?
Investments | Financial Planning | Retirement | Save Tax | Protection |
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