Equity Release: 7 popular reasons why people release wealth tied up in their homes
Release Equity to pay for home and garden improvements
This is one of the most popular reasons for home owners to release equity from their property. According to lender research*, 30% of equity release borrowers questioned quoted home improvements to the property and or garden as a reason to unlock equity. Home improvements can add value to the property and greatly improve quality of life.
People are often surprised to learn that you can use equity release to purchase a new home. This can be a second home, but does not have to be.
At Access Equity Release, we recently helped a retired couple who wanted to downsize their home but also relocate to a more expensive area of the country to be close to their children and grandchildren. They were thrilled with the options available to them through equity release. They met with their adviser in May 2018 and by July 2018 they were happily settled into their new home with a Lifetime Mortgage.
To pay off an existing mortgage and debts
It may sound strange to borrow money to pay off another loan. However it is a very popular reason to release equity. According to research from Prudential, one in five people expecting to stop work this year will owe an average of £33,900. According to their research, the proportion of people retiring in debt is 19%.
A Lifetime Mortgage is different to an ordinary mortgage because you only pay off the loan when you die or if you need to move into long-term care, removing the need to meet monthly mortgage repayments. There are different options available to you in terms of how you pay the interest and whether you want to take one lump sum or draw down more money later if you need to. A qualified equity release adviser can help you understand all of the options available to you. You can also get a Lifetime Mortgage with a ‘no negative equity guarantee’ to ensure that you never owe more than the value of your home.
Increase disposable income
So many of us are heading for a cash-squeezed retirement. We’re living longer and according research from the Pensions and Lifetime Savings Association (PLSA), 8 in 10 adults fear that they are not saving enough for retirement (PLSA July 2018).
However, as many homeowners have benefited significantly from rising house prices, equity release can be a practical solution. A tax-free lump sum can provide a long-term top-up to retirement income. Some people choose a draw down facility which means that you can take further cash out as and when you need it. An equity release adviser can discuss all of the different options with you.
To help family members financially
We are often asked if it is possible to leave an inheritance for loved ones if equity is released from the home. It is possible and there are ways to guarantee an amount. Some people prefer to “gift” an amount of money now rather than leaving everything until after they die. They may release cash from their home in order to help children or grandchildren to buy their first home for example or pay university fees. Inheritance Tax Planning is not regulated by the Financial Conduct Authority. Your equity release adviser may refer you to specialists for help with tax and wills.
How many of us dream of travelling the world when we retire? Ticking off destinations on the bucket list and perhaps visiting friends and relatives who live far from home. Many people use some of the money they have released to make these dreams a reality. When you release equity from your home, you can use the money for any purpose.
For some clients, a new car is high up on the list of things that they would do with the money raised from equity release. A modern and reliable new car is a big expense that is out of reach for many in retirement. We have helped to make the dream car a reality for some of our clients through equity release.
Have you thought about what you might do with the money if you released equity from your home? Arrange a call back from Access Equity Release.
Equity Release is not for everyone, which is why you must take professional financial advice from a qualified equity release adviser to make sure it is a suitable option for you. They will help you to understand all of the options, the benefits and the potential risks.
Access Equity Release is a trading name of Your Mortgage Decisions Ltd which is authorised and regulated by the Financial Conduct Authority (FCA) FRN 459763.
*Figures from Retirement Advantage customer research 2017