Equity release has been rapidly growing in popularity over the past few years due to the number of benefits that it can provide.
Equity release is a financial product, available to those aged 55 or over, which allows you to release the equity that you’ve built up in your home whilst being able to carry on living there. It can provide you with either a cash lump sum, a regular income, or the ability to withdraw smaller lump sums as and when you need them.
The money released must first be used to pay off any outstanding mortgage balance on the property, but then the rest can be used for any legal purpose.
This article will outline some of the best, and most common, ways that equity release can be used.
To find out whether equity release is right for you and how much money you can release from your property, use an online equity release calculator.
Property renovations and improvements
A very popular use for equity release is to make home improvements or renovations. If you’ve always wanted to add a conservatory or extension, or maybe renovate the kitchen or bathroom, equity release can provide the funds to do this. It can also allow you to make any improvements to your home that make it easier to live in as you get older, like having a stair lift fitted for example.
This means that you’ll be able to stay in your home for longer instead of having to downsize or move into a care facility.
When you take out equity release, the money has to be used to clear any outstanding mortgage that you have on the security property, but the rest can also be used to clear any other debts that you may have.
If you have debts with higher interest rates, like credit card balances or a personal loan, you may want to pay these off using equity release if you’ll pay less in interest over the long term.
Boosting retirement income
Some equity release plans allow you to take the money as a regular income rather than a lump sum.
This can be very useful if your pension pay-outs are particularly low compared to what you’re used to earning in comparison to your current outgoings; or simply if you want some more disposable income to have a better quality of life during your retirement years. Just be aware that this can affect your eligibility for certain means-tested benefits, so make sure to talk to your advisor if this is something you’re concerned about.
Providing family with an early inheritance
If you’ve got grown-up children who are trying to get on the property ladder or start a business, you may want to help them out sooner rather than making them wait for an inheritance.
Equity release can provide the money that you would have left to your children as an inheritance much earlier and at a time that’s more beneficial to them. Doing this can also be an effective part of a wider inheritance tax mitigation plan, but this is something you should speak to an accountant or financial advisor about.
Funding holidays and other once-in-a-lifetime experiences
If you’re not too concerned about the effect that it can have on your estate and the legacy you’ll leave behind, equity release can also be used to fund holidays or anything else that you want to experience now that you have the time to do so.
If you want to discuss equity release and the possibilities that it can provide, then make sure you speak to a reputable equity release broker or advisor as they will be able to help you make a decision that’s right for you.