Thousands Boost Their Retirement Fund With Equity Release

Soaring numbers of older homeowners are choosing to release tax-free cash from their homes to help boost their retirement fund.

Homeowners aged 55 and over borrowed a record-breaking £1.02 billion between July and September using equity release plans, according to latest figures.

Equity release helps people who may not have disposable cash to benefit from releasing some of the money locked up in their homes, while they continue to live there in retirement.

Figures from trade body the Equity Release Council show 12,016 equity release plans were agreed between July and September. This is around double the amount for the same period three years earlier.

Over-50s hold three quarters of UK housing wealth. So it’s little wonder that a rising number of people are tapping in to their property wealth to boost their retirement savings.

Meanwhile, a growing number of products are on offer from providers, as equity release becomes an increasingly popular option among cash-poor retirees.

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How equity release works

Lifetime mortgages are the most popular form of equity release for people preparing for retirement. These are basically mortgages for the over-55s, but without any monthly repayments, unless you choose to make repayments.

Interest rolls up from when you take the loan, which runs until the end of the homeowner’s life. The loan is only repaid when the property is sold, or the owners go into care or die. It is a condition of equity release that you have to pay off any existing mortgage or secured loan.

You access the cash tied up in your property as a lump sum, or as smaller chunks – depending on what you plan to use it for – up to an agreed limit. The minimum loan for equity release is typically set at £10,000.

A staggering £11million is being released every day from homes using equity release plans, according to the Equity Release Council. Reasons for using equity release include wiping out any existing standard mortgage, funding travel in retirement, say, or paying for home improvements.

How much cash could you get?

The amount of cash you can get with equity release depends on the value of your property, and your age. The older you are, the more tax-free cash you can typically get. If you’ve got a health condition, you may also be able to get a larger sum.

You can use Age Partnership’s to discover how much equity you could release.

But do your homework before taking the plunge. Anyone considering this option should seek good retirement advice, as equity release isn’t for everyone. They will provide you with the facts and figures, so you can make an informed decision about your retirement finances.

A broker such as Age Partnership will search the whole market for you, finding the most suitable product for your personal circumstances, and giving you an illustration of the costs involved in equity release.

You may want to ask an advisor about a no negative equity guarantee so ensure you won’t pass on any debt to your loved ones.

Bear in mind that taking cash out of your home will reduce the value of your estate, so you’ll potentially have less to pass on after death. Equity release may involve a home reversion plan or lifetime mortgage which is secured against your property. Equity release could also affect your benefit entitlements, such as pension and universal credit.