Imagine suddenly having all this income flood your way. Having a positive bank account with numbers that you may have never seen before. That’s what happens when you release equity from our home.
The big question is: what do people spend equity release on. Or, move accurately, what can you do with all this financial freedom.
We’ve delved into the minds of numerous over 55s who’ve released equity from their home to find out what they have spent the money on in 2021.
What Do People Spend Their Equity Release Cash On?
The great thing about equity release is that the sky’s truly the limit. You release a tax-free income to spend in any way you wish.
Of course, circumstances do differ. You might be in a position where you don’t have a private pension or financial support from your family. If not, you can use equity release to supplement income, allowing you to maintain your standard of living or simply to get by.
In other cases, individuals will use equity release for both days to day living and the chance to buy a big-ticket item. Finally, others might be in the position to use the money to splurge on home renovations or a world tour.
Whatever your decision, be wise about the money and think about your future. You don’t want to splurge and then end up income-free.
Gain inspiration from: Equity Release Uses
Pay Off Debts
Many people will use their equity release cash to pay off debts, freeing themselves of monthly repayments. It’s not uncommon for people with a mortgage or other loans to clear them with equity release.
For some people, their age or other factors mean that they no longer qualify for a state pension1. In these cases, the equity release loan can provide them with an income to help make ends meet. Regular benefit payments can be life-changing.
Pay For Long Term Care
One of the reasons people take out equity release loans is to help pay for care, which may be needed due to illness or other factors.
Not everyone wants to go to a retirement home. Instead, they use equity release to get long-term care and all the advanced equipment that could make later life easier.
Paying for Care Homes
Many people have partners who can no longer manage to live independently and need permanent care. These individuals will use equity release loans to achieve this objective. This may be a temporary measure or, in some cases, permanent depending on what is available and affordable at that time.
Equity release provides an alternative way of paying towards care homes without selling your property which might not give you enough money anyway!
Make Home Improvements
Do you have a dream makeover wish? A common use for equity release is to make home improvements or extensions on the home. The money can be used towards any form of renovation. You can drastically increase your property value this way. Especially now that equity release interest rates are at an all-time low in 2021.
Additionally, you can make renovations that could help with making your home more accessible for older folks.
Buy a New Car
Some people will use their equity release cash to buy themselves a new car, a much-needed treat. Imagine buying a car cash and not having to worry about monthly repayments!
Invest in Property
With property prices sky rocketing in recent years, some people will use their equity release cash to buy a new home to rent out, and others may choose to invest it. The decision is entirely up to you but, be careful not to overstretch yourself. As with any investment, the market may not always be on your side.
Purchase Mobility Equipment
If you have become reliant on equipment such as stairlifts, mobility scooters, and other aids to help with day-to-day life, then an equity release loan may be the perfect solution.
You can pay for these items outright or use your equity release cash to finance their purchase, making it easier to manage financially!
Some people will use their equity release cash to fund a dream holiday, or to have some much-needed time away. Whether it’s an exotic trip or just down the coast, this is often what older generations think of first when considering how best to spend their money, and it’s not something to dismiss.
For some people, their equity release cash can be used towards financial independence and ensuring that they can support themselves in the future. This might involve researching the best annuity providers or investing their cash in stocks, bonds, and other investments.
Those who are too ill to work or require regular medical care might need financial support. Equity release is one way of providing this and helping you maintain your independence for as long as possible, if you don’t have family members who opt to support you.
Helping Family Members
In some cases, you can use equity release cash to help family members. This may involve paying for their care or helping them financially get back on track after a difficult time such as unemployment or illness.
In 2021, in a post-COVID world, more and more people require financial assistance to get by. This could include your close friends or family.
Some people will use their equity release cash to help with retirement planning.
The money can be used towards any investment or savings, such as a private pension2 fund (although you would need to ensure that this is a beneficial option first).
Regardless of what it’s spent on, you must make time to research these decisions carefully so that they are right for you!
How Much Equity Release Can I Get?
This depends on a number of factors, including your age, the value of your property, and your health condition. You must always speak to a specialist who intimately knows this type of product!
In addition, our equity release calculator can help you determine how much equity is tied in your home.
How Much Does an Equity Release Cost?
Your equity release loan will usually cost you around £1,000 to £3,000, depending on the cost of your lender and financial adviser. In addition, you will be charged fixed compound interest that will be paid off from the sale of your home when you die or move into permanent care.
How Much Income Tax Do I Have to Pay?
You’ll only need to pay tax if you’re receiving income from any other source, such as investments or pensions, when you take out an equity release. Otherwise, equity release cash is tax-free.
How Do I Know if Equity Release Is the Right Option for Me?
It’s worth speaking with a specialist who knows about this type of product to determine whether it will be suitable for you.
This can depend on your circumstances, health, and other factors. Be sure that all avenues have been explored before making any final decisions!
Equity release is a serious financial decision. You should consult with an independent financial adviser before making any final choices.
It’s important to know that you can spend the money you receive from equity release in many different ways, but it’s a loan, and not free money.
Be sure to have a plan on how you’ll spend your money to make the most of it.