Older homeowners have seen their estates’ value grow by almost £14 billion recently as house prices continue to rise, earning the average pension over £1,000 every month, based on reports by the latest real estate analysis.
Those who own their homes outright have earned at least £3,100 tax-free cash from each of their estates in the past three months, taking their estate wealth to a record high. With this data in mind, it’s no wonder equity release has been the most popular retirement financial plan for many.
While about 30% still opt for downsizing, it’s not always the answer if it means moving away from your family and friends. Equity release enables any proprietor aged 55+ to borrow against the value of their home and repay it when they die or move into residential care. Some equity release examples include the popular lifetime mortgage and home reversion plans.
These schemes are a lifeline to many with debts, lifelong dreams they haven’t actualised, or shortfalls in their pension income.
Are You Considering Equity Release?
That said, how does equity release work, and how can you use the plans to improve your life? Here are some but a few of equity release examples to help you live the retirement you deserve:
#1. Home Improvements
Is your estate everything you always dreamt it would be? Have you ever wanted a modernly designed kitchen instead of that traditional one? Well, with equity release, you can work on your home gentrification projects and still have some cash to spare.
It could be new doors, windows, or roof repairs, or perhaps you want to get those stylish soft carpets and a landscape garden. Using the tax-free cash you get from equity release, you can finally make your home look and feel more modern, better-kept, and boost your self-esteem. Who doesn’t want to have a home that is the envy of neighbours?
#2. Cater for Your Care Home Expenses
You fear to go into residential care, especially with the cases of negligence in the aged-care systems. So, you want to get in-home care and don’t know where to get the funds to finance this operation.
Well, fear not. Apart from the local government contributions, by taking out an equity release plan, you can get the funds to help you get the best care. You can even get your family to employ a home caretaker to help you with domestic chores like washing, dressing, cooking, and cleaning.
You don’t always have to feel like a burden to your family. With an equity release plan, you can achieve greater comfort and dignity in later life.
#3. Purchase Mobility Equipment
Another example of equity release uses is buying mobility equipment. With age catching up, your limbs become tired, and sometimes you might require mobility aid to move from place to place.
You can get help from the local authority with this. Still, the funds won’t be enough to get you the best mobility scooters, stairlift, and adaptations around your home to help in enhancing mobility and preserve your independence.
With equity release plans, however, you can achieve a certain level of comfort by adapting entryways, getting high-quality stairlifts, buying adjustable beds, reclining chairs, mobility scooters, and anything else that’ll help make your life easier.
#4. Pay Off the Mortgage
Is your current mortgage giving you stress hives? Have you been searching for ways to clear your house mortgage but don’t know where to start? Well, according to the Financial Conduct Authority,1 28% of homeowners with equity release in 2019 used it to clear out their existing mortgages.
You can also do away with your mortgage in the same way. By taking out the equity that’s tied up in your property, you can pay up your remaining mortgage and get to enjoy the spare cash as you wish.
As per the equity release contract, you must pay off your mortgage before spending the cash you released from the value of your estate. So, take a plan out today and enjoy your retirement stress-free.
#5. Clearing Debts
Have you been facing any difficulty trying to keep up with your lines of credit or struggling to pay your debts?
Some debts can be very costly, and if you can’t pay them off quickly, then taking out an equity release plan can be your best option. Equity release might seem tricky, but considering that you must repay it when you die or move into permanent care, then it’s the most suitable financial plan to help you get out from the debt ditch.
Nevertheless, it would be best if you looked into equity release interest rates on both your current debts and the cash from the equity release scheme. If the interest rate on the equity release plan is lower than that of your line of credit, then, in the long term, equity release could mean more of your estate is left intact.
As always, you need to ensure that you discuss your terms with an independent financial adviser to ensure that you cover all the issues and understand the comparative costs and risks.
#6. Making Investments
According to research, over 30% of equity release consumers have been using their capital in funding their business ideas or in buying shares. With the sole purpose of turning cash into even more money, they use the equity tied up in their homes to make the most of attractive investment opportunities.
That said, if you have any lifelong dreams like opening up a restaurant, investing in agriculture, or growing your current business, then equity release can help you actualise these plans.
It would be fantastic if you also remembered to get the best equity release advice by consulting your independent financial adviser before risking your equity on investments.
#7. Help Your Friends and Family
With the world economy sleepwalking into one financial crisis after another, you might want to help your family change their lives for the better. Lucky for you with equity release examples like the home reversion plan or lifetime mortgage, you can get the funds to help your children and grandkids to get on the first step of the housing ladder with the capital for a deposit.
Moreover, with the estate values rising every day, it makes sense to help them now that waiting for the inheritance.
#8. Go on an Ideal Holiday
Have you always dreamt of sipping wine on the beach shores of the Maldives or experiencing history in Olympia, Greece? Has it been your fantasy to feel the sun in a Thai archipelago, hear the Atlantic Ocean washing up against the side of the boat? Well, by freeing up the money in your home, you can turn that fantasy into a reality. As they say, you only live once – so why wouldn’t you want to join them?
#9. Boost Income
Sometimes your pension savings can’t help you meet all your needs, and with the life expectancy on a 0.08% increase from 2019, you need help on a more regular basis to make your ends meet.
Equity release can help boost your pension and make your life a little more comfortable by plugging a significant gap in your income needs.
#10. Buy Your Second Home
Whether it means spending your holidays by the beach or having another asset to leave to your family, having a second home is something most people aspire to have. It’s probably why many homeowners are using their equity release schemes to purchase second homes.
For legal purposes, though, financial experts are advising their clients to consider being the sole occupants of their second home or letting it out for a maximum of four weeks consecutively. You must also use the estate for a minimum of four weeks every year, and should have no formal agreements or Assured Shorthold Tenancy in place.
Another alternative is to get a buy-to-let property and use the extra rental money to supplement your pension pot.
#11. Buy Out Your Partner/Spouse
Divorce rates in the UK have been edging up. With these rates, over 100,000 couples today are facing financial hurdles on how to divide their assets and savings. One of the most stressful parts is figuring out who will keep the marital home.
If no one wants to stay, or one can’t afford to purchase the other out, most people have been opting to sell the house and splitting the proceeds. However, if you don’t want to sell, taking out an equity release plan is the best option for you.
It not only enables you to free up some cash but also helps in buying out your partner, thus making the divorce process less stressful.
#12. New High-Value Items
If you’ve been feeling left out in terms of technological advancements or the modern-world lifestyle, then you need an urgent upgrade, and equity release can help you get modern devices, clothes, and other belonging.
Imagine no longer having to put up with that old TV set, worn-out furniture, breaking down washing machine, old car, and clunky gadgets!
With life expectancy on a high, people are living longer than ever before, meaning that you have more time to enjoy your hard-earned retirement.
You can use your equity release funds to:
- Make the much-needed home improvements
- Supplement your pension income
- Pay for long-term care
- Pay for the existing mortgage
- Pay your debts
- Go for that dream vacation
Yes, you can.
However, with the equity you release, you must repay your balance first. Equity release must be the only charge listed against your home.
Yes, you definitely can. With estate values on a rise, equity release plans allow you to cash in on the value of your home. By cashing in this equity, you can pay your existing mortgage first before you use the rest of the cash.
The equity release laws stipulate that any homeowner with an existing mortgage or debt secured against the estate by completion – either with the proceeds of the lifetime mortgage or other savings you may have.
You must ensure that you get expert advice and think carefully before securing other debts against your estate.
You have to consolidate your debts into a mortgage, and the lender might need you to pay more over the entire plan term than you would with your current debt.
Yes, you definitely can.
Equity release can be the way to provide yourself with a decent level of comfort and dignity in your later life without always leaning on your friends and family.
Equity release is a mortgage plan that allows you to unlock the funds tied up in your home while also giving you the right to reside in your property.
The ‘catch’ with these plans, however, is that you don’t make any monthly repayments. Instead, you repay the long at a later stage, usually when you pass away or move into residential care.
Yes, equity release is a fantastic financial idea. It offers you financial freedom since you don’t go through any credit checks, and you can spend the cash, however, who want. You also get to retain the ownership of the house till you die or move out of the house permanently.
Nonetheless, it does affect the amount of inheritance you leave your family. So, you need to consider a plan that allows you to ring-fence some value of your property and gives you the ‘negative guarantee.’
By unlocking some of the equity in your home and using the equity release examples to fund your plans, you can make your retirement even more worthwhile. Therefore, if you want to work on your gentrification projects and finance your ideal holiday, consult your local financial adviser and start making plans towards taking out an equity release plan.
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