Ever heard of equity release but don’t have a clue what it is? There are many terms thrown around without an explanation, but we’re here to change that. In this article, we’re going to explain what equity release on your home is and how it can help you.
When someone reaches the age of 55, they can take out an equity release. But what is this? Well, an equity release is accessing the money that is tied up into your home. If you choose to do this, you can receive the money as a lump sum or in a smaller amount, if preferred. Keep reading to find out more about equity release and how it can help you.
What are the available types of equity release?
When it comes to equity release, there are two different options available. These are:
Lifetime mortgage is the most common choice when it comes to equity release. When a property is your main place of residence, you can take a mortgage out on your property and still have ownership of it.
You can make repayments or allow the repayment to be made when the property is sold, and this happens when the remaining borrower dies or moves into a care home. Interest will be added on top of the loan.
Another alternative equity release is by home reversion. This is where you sell all or part of your home, and can continue to live in it until the remaining borrower dies or moves into a care home. The property will then be sold and split if partly sold originally.
How can equity release help you?
It Can Provide You with Quick Money
Where you have money invested into a property, and you aren’t willing to sell your home for a smaller property or to change to renting, equity release is there as an alternative option. It allows you to have money but remain in your home.
Perhaps you’ve reached the retirement age, and your only funds are your pension and property. Sometimes pensions don’t cut it, and they can’t always provide a worry-free financial life.
After a lifetime of saving for your pension, the average pension in the UK stands at £61,897. This only provides an average retirement income of £3,000 a year from the age of 67 on top of the state pension they will receive.
The average family spends £587.90 per week, which is a whopping £30,570.80 a year. Obviously, an individual or elderly couple are likely to spend less than this. That said, from this, we can determine that a retired person will need to be living a very basic and non-extravagant lifestyle on this income.
Equity release can be the backup that’s needed, with an additional bit of money to do other stuff, such as travelling. Where you have all this free time, what’s better to do than spend your hard-earned cash on enjoying what life has to offer you.
It Can Pay for Long-Term Care Costs
Say you believe one day you will need to enter into long-term care, for whatever reason, but you want to keep hold of your savings to pass onto your family in your Will after you pass away.
The average weekly cost of living in a long-term care home is £888, money which can quickly wipe out your savings. So, using the equity that’s caught up in your home can be an alternative option to cover those care costs, which are usually a lot of money.
Property Price Increase
If you purchased your house a long time ago at a considerably low price, you might be surprised at the return of investment you will receive when either selling it or doing equity release.
Where you don’t wish to pass your home onto loved ones once you pass, you can use the equity release to enjoy your retirement. Perhaps you could purchase gifts for your loved ones while you are alive, or simply to splash the cash on yourself, such as going on holiday, purchasing nice cars, and more.
You Can Continue to Live in Your Home
What we believe is the best benefit of equity release is that you do not need to move out of your home until you pass away or move into long-term care.
Make sure you’re certain before deciding on equity release
What we can conclude is that the benefits of equity release sound great and sway you in. However, it’s a huge decision to make, and there are other considerations too, such as the interest that will be added on top of the money owed.
Don’t jump into something before spending the time researching it and finding out if it’s the right option for you. Take the time to speak to a solicitor too, who will be able to provide an in-depth insight into equity release and the benefits and drawbacks of it.
Are you interested in equity release? Let us know your thoughts below in the comment box.
Please be advised that this article is for general informational purposes only, and should not be used as a substitute for advice from a trained legal professional. Be sure to consult a legal professional if you’re seeking advice about equity releases. We are not liable for risks or issues associated with using or acting upon the information on this site.