Equity release is becoming more popular than ever, reports the Equity Release Council, with 20,397 customers unlocking £936m of property wealth in the last three months alone. So why do people consider equity release as an option?
According to the Financial Times, it depends on your age! Customers aged 65 to 74 were more likely to take out equity on their property to fund home and garden improvements, boosting their retirement income and helping the family financially. Those aged 55 to 64 were more likely to use the cash to pay off their existing mortgage or any unsecured debt.
Free up more disposable income
Taking out a loan can be trickier for those who are retired because you may not be able to financially commit to repayments on a pension income, you may be refused by some lenders if you’re not in full time work or you may just want a more flexible option tailored to your needs. Releasing equity from your home to access a lump sum with no monthly commitments is a popular choice with our clients, as it allows them to fully personalise the plan to suit their requirements.
Help out loved ones
One of the biggest reasons people unlock the cash in their home is to ‘gift’ a lump sum to relatives. This can be a lovely way to help your children or grandchildren with a life milestone such as buying their first home, a new car, paying for higher education or paying for a wedding. We find our clients enjoy seeing their loved ones take that next step, something they wouldn’t be able to do if the money was left in a will.
Home and garden improvements
A huge 64% of homeowners use their equity release plan to make improvements and development son their home and garden, reported Today’s Will & Probate. Some people plan ahead and use the cash to modify their homes for later life. This might include making the house more accessible by fitting a stairlift, fitting a walk-in bath or fitting the house with ramp access. Of course, many others choose to modernise their homes or even add more space with an extension or conservatory, as retirement means more time is spent at home. This can add more value to the property in the long-term.
Gap years aren’t just for teenagers! In fact, the amount of people aged 55 and over taking a gap year to go travelling or volunteer in another country is at its highest. An equity release plan can be a fantastic way to contribute towards travel costs. So, whether you want to go on a round-the-world cruise or you want to volunteer in India, the world really could be your oyster if you use the cash from your home. Equity release plans can also help out with travel costs if you want to visit far-away loved ones.
Pay off the mortgage
Some people are happy to downsize from their home when they hit retirement age, but it isn’t for everyone. If you would prefer to stay in your current home but you still have some of the mortgage to pay off, then the cash released from your bricks and mortar can help you pay off the remainder. Data from Prudential also reveals that 20% of people who intend to retire this year will owe an average of £33,900 on their mortgage. A Lifetime Mortgage could be a good option for this, as you won’t make any repayments until after your death or if you go into long-term care. There’s also the option of a Lifetime Mortgage with a ‘no negative equity guarantee.’ This ensures you never owe more than the value of your property.
A new, reliable car is a priority for many people when they’re coming up to retirement, as it’s a great way to retain independence and travel around the country (or even overseas!). In the long-term, a new car could save you money on repairs, maintenance and much more. Retirement means you’ll have a lot more time on your hands, so a car can be very useful for running errands, visiting friends and relatives, and going on day trips.
Are you considering unlocking the cash in your home with an equity release plan? Speak to our friendly advisors today on 0800 614 722