If you are one of the millions of over-55s wondering about whether to release equity on your home, you probably have some idea already about how the scheme works.
One of the benefits of equity release is that you get to use your lump sum however you want.
But besides financing those much-needed home improvements (the most common use of funds after clearing the mortgage), there is a whole range of other reasons to consider equity release, from leisure time to tax liability.
10 Reasons To Consider Equity Release
1 – Pay Off Your Mortgage
When you take out an equity release plan, the first thing you’re obliged to do is pay off any remaining mortgage. Equity release providers need to ensure that there will be enough equity left in your home at the end of the loan term to pay for the money you borrowed plus the interest on your debt. If you still have a mortgage, there’s a risk it will eat into that.
For example, if you have £20,000 left on your mortgage, you would need to make sure you withdraw at least this much through your equity release plan to pay it off, plus your desired lump sum.
It may seem like an annoyance, but it means you can kiss goodbye to your monthly mortgage payments forever.
2 – Clear Your Debts
Did you know that on average, Brits aged 55-64 years owe £2300 in credit cards, overdrafts and personal loans? According to the Financial Conduct Authority, 65-74-year-olds are only slightly better off. On average they hold just over £1000 in unsecured personal debt.
The lump sum that comes with equity release could help clear your repay your other debts and reduce your monthly outgoings.
3 – Fund Home And Garden Improvements
When you release equity, you eliminate the need to downsize. For this reason, it’s common to spend some of the equity release money on improving your property; either to make it more accessible, increase its value for when it’s eventually sold, or simply to make it a more enjoyable place to spend your time in your retirement.
4 – Give Your Family A Living Inheritance
As life expectancy continues to rise in the UK, so does age at which young adults can expect to get a foot on the property ladder for the first time.
Instead of waiting until they’re no longer around to pass their wealth onto their family, many homeowners entering retirement now choose to gift their children tax-free inheritance through equity release.
This can help cash-strapped younger relatives to take important financial strides, such as buying their first home or paying off student debts- while you’re still around to see them enjoy it.
5 – Top Up Your Income
After working hard for decades, many people rightfully look forward to a fulfilling and comfortable retirement. Unfortunately, not everyone can look forward to a pension which will pay for the lifestyle they deserve.
Equity release doesn’t only work as a tool to fund large one-off expenses. You can choose to withdraw payments in a steady stream to give your retirement income a boost so that you can reap the benefits of the investment you put into brick-and-mortar over the course of your working life
6 – Enjoy The Holiday Of A Lifetime
Equity release is all about using your wealth to improve your quality of life- which doesn’t end with just making sure the mortgage is taken care of! The large lump sum that comes with equity release can be used to pay for extra leisure activities or luxury purchases.
Whether your idea of the perfect escape is trekking through the Andes or sipping sundowners on Sydney harbour, your home’s equity could help to fund activities that really let you make the most of your retirement. After all, shouldn’t finishing with full-time employment be a cause for celebration?
7 – Reduce Your Inheritance Tax Liability
When you release equity from your home, it reduces the value of your estate. At the moment, estates worth over £325,000 are liable to a 40% Inheritance Tax levy on everything above this nil-rate threshold.
If you know your estate is worth more than £325,000, you may be able to reduce the amount of tax its is liable for by releasing equity on your home while you’re still alive.
8 – Improve Care Affordability
As we age, our lifestyle needs change. This can put a strain on finances, especially if you or a loved one reaches a point where specialist healthcare is required.
Equity release can make this more affordable and potentially allow you to tor your partner to stay in your own home for longer, by funding healthcare or nursing support at home.
Alternatively, it could help cover the costs of moving permanently to a nursing home if required.
9 – Buy A Second Home
If your main residence is especially high-value, you may be able to release enough equity from your property to purchase another property in the UK or abroad.
Some people opt to this as a way to invest in their estate, to provide another income, or simply to enjoy weekends away at a home-from-home through their retirement.
10 – Ease The Burden Of Monthly Bills
If you find that your retirement income is being put under strain by monthly bills- for utilities, hire purchase agreements or subscriptions- equity release could provide a steady stream of income or savings pot for you to cover the essentials and maintain your quality of life.
How Can Equity Tree Help?
Here at Equity Tree, we have partnered with some of the UK’s leading Equity Release broker companies.
They have already helped thousands of people release equity already, and they can do the same for you.
Choosing an independent adviser means they won’t recommend a scheme unless they are sure it is in your best interests. Their advice is also regulated by the FCA, which gives you an additional layer of protection.
If you would like to speak to one of these equity release companies, click on the below and answer the questions.