Based on the latest real estate analysis reports, older homeowners have seen their estates’ value grow by almost £14 billion recently! As housing prices continue to rise, many pensioners find themselves earning an average of over £1,000 every month.
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!
Do you have an idea of what you could spend this kind of income on? If not, here are 12 great uses for equity release to inspire you. Continue reading to find out more!
What You MUST Know
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
Are you looking to release equity from your home, and need inspiration on how to use it? The question is, how can you improve your life?
The great thing about equity release is that you can use the income in any way you wish.
Here are 12 ways you can use equity release to help live the retirement of your dreams:
1. Invest in Home Improvements
Have you always dreamed of upgrading parts of your house?
You can use the equity released from your property to pay for renovations. By doing so, you are not only allowing yourself to live out your retirement in your dream space, but you are also increasing the resale value of your home.
2. Cater for Your Care Home Expenses
Moving into a care facility can be a great way to retire for some. However, many prefer to live out their golden years in their life-long home.
Does this sound like you?
In this case, you can consider using equity release to pay for in-home geriatric care, should the need arise.
In addition, you might not need personal care but could do with a hand. Perhaps you could use the funds to hire someone who can help with daily domestic chores.
3. Purchase Mobility Equipment
When it comes to mobility care, you should be able to get a grant from your local authorities. However, this is likely not enough to pay for the most high-tech products available on the market.
With equity release plans, you can achieve a greater 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
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 who released equity in 2019 used it to clear 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.
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, consider equity release to free up some cash.
Have a look at equity release interest rates. If the interest rate on your 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 these terms with an independent financial adviser to ensure that you understand all the comparative risks and costs.
6. Investment Your Cash
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.
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.
7. Help Your Friends and Family
With one financial crisis after another, you might want to help your family with rising expenses. Lucky for you, with equity release schemes like the home reversion plan or lifetime mortgage, you can release funds to help your children and grandkids.
Moreover, with the estate values rising every day, it might make sense to help them now instead of waiting for their inheritance.
Find out more: Giving Your Family an Early Inheritance
8. Go on an Ideal Holiday
Do you have family overseas that you would like to visit? Or perhaps you have a dream destination on your bucket list?
Remember, you only live once!
By freeing up the money in your home, you can turn this fantasy into a reality. With equity release, you can choose to receive a larger lump sum to fund this trip.
9. Boost Your Income
Sometimes your pension savings is simply not enough to keep you going.
With life expectancy on a 0.08% increase since 2019, many people are living longer these days, putting pressure on you to have enough money to keep going until the end.
Equity release can help boost your pension and make your retirement vastly more comfortable.
10. Buy Your Second Home
Whether it means spending your holidays by the beach or having another asset to leave to your family, owning a 2nd home is something most people aspire to. It’s probably why many homeowners are using their equity release for this purpose.
For legal purposes, though, 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 Tenancy in place.
Another alternative is to invest in a buy-to-let property and use the extra rental money to supplement your pension pot.
11. Buy Out Your Partner/Spouse
Over 100,000 divorced couples in the UK are struggling with 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. Purchase New High-Value Items
If you’ve been feeling left out in terms of technological advancements or the modern-world lifestyle, or you need an urgent upgrade, equity release can help you get modern devices, clothes, and other belonging.
People these days are living longer than ever before, meaning that you have more time to enjoy your hard-earned retirement.
Got Questions? Check These First
What Can Equity Release Be Used For?
You can use your equity release funds for anything you with, including:
- Making much-needed home improvements.
- Supplementing your pension income.
- Paying for long-term care.
- Paying for an existing mortgage.
- Paying off your debts.
- Going on a dream vacation.
Can Equity Release Pay Off a Mortgage?
Yes, you definitely can. With estate values on the rise, equity release plans allow you to cash in on the value of your home. By cashing in this equity, you must pay your existing mortgage first before using the rest of the cash.
The equity release laws stipulate that any homeowner with an existing mortgage or debt secured against their estate must settle this – 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.
Can You Use Equity Release to Fund Your Care?
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.
What Do People Spend the Equity they Release on?
Well, equity release plans offer you the chance and financial freedom to spend the tax-free cash as you wish. According to research, most people tend to use the funds to finance their vacations, world tours, investment plans, help out their families, pay their existing mortgages and debts, and do some home improvement projects, among other things.
By unlocking some of the equity in your home, you can make your retirement even more worthwhile. Having cash to spend can make your dreams come true.
It is, however, important to make an informed decision about whether or not equity release is right for you. Have a look at the equity release alternatives before you make your final decision.
You might also want to have a look at the types of equity release and use our equity release calculator to find out how much equity you can release from your home. This financial decision might be the answer that you have been looking for!