Equity Release Uses in Jan 2022

15 MOST COMMON Uses of Home Equity Release

Contributors: Nicola Date, Katherine Read. Edited by Rachel Wait & Reviewed by Francis Hui

Top Equity Release Uses. Here are the Most Important Ways to Utilise the Growing Equity in Your Home. Unlock Your Tax-Free Cash with Equity Release.

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15 MOST Popular Uses of Equity Release

Imagine having the key to unlock all your bucket list dreams?

Based on the latest real estate analysis reports, older homeowners have recently seen their estates’ value grow by almost £14 billion!

Could you be holding a piece of that pie?

If you’re not careful, you could be sitting on a goldmine and not even know it! That’s where equity release comes into play.

We’re here to inspire you with:

  • The most common uses of equity release in Jan 2022.
  • How equity release can be life-changing for homeowners over 55.
  • How equity release can help you secure a better financial future.

We’ve spent hours researching more than 18 plan providers and examining statistics to unpack the top equity release uses in Jan 2022. What we’ve discovered could be life-changing for you and your family.

Do you have an idea of what you could spend this kind of income on? If not, here are 15 questions you’ve probably been asking. Continue reading to find out more!

What’s Equity Release?

Equity release is an umbrella term for a series of later-life mortgages that allow you to unlock the cash tied into your home. You’ll be allowed to remain in your home for the rest of your life and the loan, plus interest, is repaid, usually from the sale of your home, when you pass away or move into long-term care.

INTERESTING READ: What’s Equity Release & How Does It Work?

Before you continue reading, we’ve summed up the most important information about equity release in this quick video. Check it out:

Ideas on How to Use Your Cash Released in Jan 2022

As house prices continue to rise, many pensioners could be earning an average of £1,000 or more every month. Those who own their homes outright could have at least £3,100 tax-free cash from each of their estates in the past 3 months, taking their estate wealth to a record high.

Are you looking to release equity from your home and need inspiration on how to use it? If so, ask yourself, how can you improve your life?

The great thing about equity release is that you can use the income in any way you wish. We’ve gathered the 15 most common questions about using equity release income.

Here they are!

Invest in Home Improvements

Can I Use Equity Release to Buy Out Your Partner/Spouse?

Yes, you can use equity release to buy out your spouse or partner. In the case of a divorce, if no one wants to stay in the family home or if one partner can’t afford to buy the other one out, most people opt to sell the house and split the proceeds. However, if you don’t want to sell, taking out an equity release plan is likely the best option for you.

This will enable you to free up some cash and help buy out your partner, thus making the divorce process less stressful.

Interesting read: Why Equity Release Is a Brilliant Choice

Cater for Your Care Home Expenses

Is It Possible to Use Equity Release to Help Family?

Yes, it is possible to use equity release to help your family. You can use equity release to help your children buy a house, to help out your family member or friend who is struggling, or to give your children an early inheritance.

Find out more: Giving Your Family an Early Inheritance

Purchase Mobility Equipment

Is It Possible to Use Equity Release to Try Avoid Inheritance Tax (IHR)?

Yes, it’s possible to use equity release to avoid Inheritance Tax (IHR). Or even, you can use equity release to reduce inheritance tax. This means that your family will be liable to pay less or nothing when you pass away. If you sell parts of your house through equity release or unlock cash, you’ll lower the value of your asset. Either way, the total inheritance will be less, reducing the tax bracket.

MUST-READ: Equity Release to Avoid Inheritance Tax

Pay Off the Mortgage

Can I Use Equity Release to Pay Off an Interest-Only Mortgage?

Yes, you can use equity release to pay off an interest-only mortgage. You can do so between 55 and 95. The percentage of your home that you may use for equity release rises gradually with age, reaching a maximum of 56% at age 95. During the equity release application process, you will continue to make interest payments on your interest-only loan. However, when your application is completed, the lender’s solicitors will repay your interest-only mortgage.

Clearing Debts

Can I Use Equity Release to Clear Your Mortgage?

Yes, you can use equity release to clear your mortgage. In fact, as per the equity release council, you must pay off your mortgage before spending the cash you released from the value of your estate. While you won’t use equity release to fund an extension, it’s a perfect way for you to have no longer worry about meeting the financial demands of a mortgage, should you be battling to make the payments.

Also, check out: How Reverse Mortgages Make Your Life Easier

Investment Your Cash

Is It a Possibility to Use Equity Release to Pay Off Debt?

Yes, it is possible to use equity release to pay off debt. If the interest rate on your equity release plan is lower than that of your line of credit, then, with long-term benefits, you can use equity release to clear your debts. Furthermore, you won’t have to worry about paying off your loan in your lifetime.

As always, you need to discuss these terms with an independent financial adviser to understand all the comparative risks and costs.

BRILLIANT READ: Economic Realities of the Pandemic

Help Your Friends and Family

Could I Use Equity Release to Pay for Care?

Yes, you can use equity release to pay for care. If you want to remain home, you can unlock equity to hire private in-home care and convert your home for fragile care, should the need arise. While you can access mobility care through local authorities, you might want more high-tech equipment.

IMPORTANT: Entering Long-Term Care? What Happens to Your Equity Release Plan?

Go on an Ideal Holiday

Can I Use Equity Release to Purchase a Second Property?

Yes, you can use equity release to purchase a second property. However, the home you release equity from must be your primary residence, where you reside for at least 6 months a year. You’ll also want to consider whether you’ll want to buy the property outright, so there’s no extra obligation in the form of a standard mortgage.

Here’s some options:

  • Equity Release to Buy a Holiday Home Depending on the value of your second home, stamp duty may be an issue when buying a holiday house in the United Kingdom, even if you use equity release to buy a property. If you’re looking to invest in real estate abroad, you’ll have to consider currency rates as well as local rules and regulations. Also, keep in mind that solicitors’ costs will be necessary if you buy a home in the United Kingdom or another country.
  • Equity Release to Buy a Second Property For legal purposes, financial experts advise their clients to consider being the sole occupants of their 2nd home or letting it out for a maximum of 4 weeks consecutively. You must also use the estate for a minimum of 4 weeks every year and should have no formal agreements or Assured Shorthold Tenancy2 in place, if you’re using equity release to purchase a second home.

Learn More: Can You Use Equity Release to Purchase a Second Home?

Boost Your Income

Can Equity Release Be Used to Buy a Car?

Yes, you can use equity release to buy a car. The majority of auto financing is based on a secured loan and requires that you repay the principal after selling your vehicle. The vehicle interest rate may be considerably greater than the mortgage rate, depending on your credit score. Lenders consider a home to be an appreciating asset,3 while cars are depreciating assets that generally lose about 20 percent of their value each year. Also, you might want to buy a classic vehicle as a collector’s item, or one that is beyond the age limit for standard car financing.

Buy Your Second Home

Can I Use Equity Release to Go On a Dream Holiday?

Yes, you can use equity release to go on a dream holiday. With equity release, you can choose to receive a larger lump sum to fund this trip.

Buy Out Your Partner/Spouse

Can I Use Equity Release to Invest in Home Improvements?

Yes, you can use equity release to fund your home improvements. Furthermore, renovating your home or garden will likely increase the value of your estate, meaning that your home may sell for substantial equity.

Great read: Why Equity Release Is a Brilliant Choice

Is Equity Release Used to Fund Retirement?

Yes, equity release is commonly used to fund retirement. Sometimes your pension savings are simply not enough to keep you going. With life expectancy on a 0.08% increase since 2019, many people live longer these days, making the cost of retirement substantially greater.

Interesting read: How Experienced & Business-Savvy Influencers See Potential in Every Corner

Can I Use Equity Release Cash to Move House?

No, you can’t use equity release to move home. Equity release is intended to last for the rest of your life, and generally, homeowners unlock equity to remain in their residence, an alternative to downsizing. Transferring equity release to a new property is a possibility; if it meets your lender’s criteria, You must have a detailed conversation with your lender before making any final decisions.

Purchase New High-Value Items

Can I Use Equity Release Funds on Investment Opportunities?

Yes, you can use the cash you unlock with equity release to fund investment opportunities. According to research, over 30% of those who release equity use it to fund their business ideas or buy 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.

Are you looking to invest? Get tips on how to make your money work for you here.

Can I Use Equity Release Cash to Start a Business?

Yes, you can use equity release cash to start a business. Furthermore, if you have a business loan, you can pay it off with equity release, but this is only advisable if the equity release interest rates are competitive.

Got Questions? Check These First

What Can Equity Release Be Used For?

Can Equity Release Pay Off a Mortgage?

Can You Use Equity Release to Fund Your Care?

What Do People Spend the Equity they Release on?

In Conclusion

There is no limit as to how you can use your tax-free equity release funds. However, ensure that whatever you decide, it’s well thought out, and you’ve considered your entire future. You don’t want to use the funds now, only to regret it in the long run.

If you’re younger (55/60), just ensure that if you’re using the equity tied into your home now, that you won’t be in a destitute position when you’re older. Therefore, make smart decisions.

Are you wondering about the maximum cash that could be tied into your home right now? Try our accurate equity release calculator. The whole process takes just 8 seconds!

Editorial Note: This content has been independently collected by the SovereignBoss advisor team and is offered on a non-advised basis. Sovereignboss may earn a commission on sales made from partner links on this page, but that doesn’t affect our editors’ opinions or evaluations. Learn more about our editorial guidelines.

rachel w

Rachel Wait
Personal Finance Journalist

Rachel is an experienced finance journalist and editor with a particular interest in personal finance and consumer affairs. She has vast experience writing about money issues, property, insurance, and consumer affairs, and you’ll find her articles regularly featured in top media and newspaper publications.
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Written by
John Lawson
Founder SovereignBoss

John is passionate about education and has made it his life-long mission to assist UK citizens on their future financial options, with a specialist interest in equity release, and SovereignBoss is the natural extension of this passion.

Reviewed by
Francis Hui
Senior Risk Manager

Having held various high-level roles across the industry, Francis is truly an expert in aiding UK citizens in their financial decisions and risk analysis. His unique insight and statistical knowledge make him the perfect person to help you take your financial future to the next level.
kath icon

Katherine Read
Consumer Affairs Writer

Since joining the editorial team at SovereignBoss, Katherine has become focused on bringing transparency to finances and opportunities for those approaching retirement age. She writes on the topics of equity release, home reversion, and mortgages.

Nicola Date
Writer & Journalist

Nicola is a financial writer for SovereignBoss and is passionate about the opportunities that equity release can open up for homeowners. Her extensive business experience and deep understanding of the industry means that she’s always up-to-date with the latest developments.

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