Six reasons to consider equity release

EQUITY release involves unlocking cash from your home, which can make it a useful option in retirement.

You can spend your property’s value while still living there, getting a tax-free lump sum, or smaller chunks of cash. That’s provided you’re a homeowner, and at least age 55.

Here are some reasons you might consider equity release.

To pay off your mortgage

Around one in three (32%) use equity release to clear their existing mortgage, according to equity release broker Age Partnership. Wiping out your standard mortgage means you’re not required to fork out for repayments in your retirement years unless you choose to do so.

You keep full ownership of your home if you take out a lifetime mortgage from an equity release provider. It is a condition of releasing equity that you have to pay off any existing mortgage or secured loan.

You can live in the property for life, or until you die or move into long-term care. The cost of the fixed or variable rate lifetime mortgage, plus the interest, is then paid off when your home is sold.

To fund home improvements

Perhaps you’re longing for a loft extension, or to give your home a makeover for retirement. One in five (20%) homeowners choose equity release to fund home improvements, according to Age Partnership.

You can use equity release to unlock wealth to do up your home, but the lifetime mortgage is secured against your property. If you decide to cash in and sell up, you may be able to take a lifetime mortgage with you, or you can settle the debt.

Help out family

You might have kids who are struggling to get onto the property ladder, or to pay off student debt. You could pass on a chunk of cash using an equity release plan to give them a leg-up.

This way, you get to help out family with a part of your property’s value, while you’re still around.

Consolidate your debts

Equity release may be used to clear existing debts. About one in 10 (10%) use equity release for this reason, according to Age Partnership.

Yet bear in mind that the minimum loan you can usually take is £10,000. Rates are higher than for standard mortgages, but there’s nothing to pay during your lifetime. You should however think carefully about securing debt against your home as it could increase the cost of the overall borrowing.

Fund your lifestyle

You want to enjoy retirement. That could mean taking the holidays you’ve always dreamed of, spending more time on your hobbies, or buying a new car. Equity release can provide a tax-free lump sum to help you enjoy life when you’ve more spare time.

Boost cashflow

Equity release can provide a valuable cash injection when you need it most. Perhaps your pension pot isn’t worth as much as you’d hoped – or you’ve failed to prepare for retirement.

Use Age Partnership’s to get an instant view of how much you could release.

Remember that equity release isn’t suitable for everyone, it may involve a home reversion plan or lifetime mortgage which is secured against your property. A whole-of-market broker, such as Age Partnership, will provide you with a personalised illustration and will search the whole-of-market to ensure that the plan they recommend is the most suitable for your needs.

You should be aware that money taken out of your home will reduce the value of your estate, or how much you have to pass on after death, and could impact on your benefit entitlements, such as pension and universal credit now or in the future.