Planning For Retirement: How An Equity Release Mortgage Could Improve Your Quality Of Life

As you journey into later life, you may need additional sources of income to pay for medical treatment, alter your home to suit your requirements, or even support your wider family. This is where an equity release mortgage could come in useful. UK residents are living longer, healthier lives, meaning that many people are having to look for additional sources of income to a pension. Receiving a lump sum of cash through equity release can help many people fund a better retirement. In this article, we discuss equity release mortgages and how they could improve your quality of life. 

What is an Equity Release Mortgage?

Equity release allows you to gain a large sum of money while continuing to live in your home. Your equity is the total market value of your property, minus any of the mortgage repayments you have yet to make. Put simply, your equity is the total sum of money you would have if you sold your home to a buyer for cash. Later in life, many people do not want to sell or remortgage their homes, but they do want to have access to a large portion of this money. Mortgage brokers often say that switching your mortgage to a new deal can be one of the best money-saving moves you can make. If you are lucky enough to have paid off most of your mortgage, equity release is something to consider. It can provide you with the money you need to cover those larger expenses, such as medical care, property adaptations to suit your requirements, and financial support for wider family members.”

How Does Equity Release Work?

When you claim your equity release, your provider will give you either a lump sum or regular income in exchange for part of your property’s value. This can be achieved by selling a portion of your home on the condition you can still live there or taking out a type of mortgage. There are two types of equity release:

• Home reversion. A home reversion plan lets you sell all or part of your property, with the legal right of continuing to live in it until you move into long-term care or pass away. The money from a home reversion agreement will be paid to you in either a lump sum or as regular income.
• Lifetime mortgage. Perhaps the most popular type of equity release, a lifetime mortgage allows you to borrow a large sum of money in the form of a mortgage which will eventually be repaid in the final sale of your home. The total amount you can borrow ranges from between 18-50% of the property’s total value. Often, the older you are, the more money you can release.

What Equity Release Can Be Used For

Equity release provides people with a way to access extra finances without having to sell their property. There are many reasons why people choose to release equity from their properties, including: 

• Home or garden improvements
• Buying a new car or caravan
• Helping with day-to-day costs
• A holiday of a lifetime
• Paying off credit cards
• Getting money to loved ones
• Paying for home care
• Paying off an existing mortgage

Is Equity Release right for you?

Equity release isn’t right for everyone. As such, it is important you take the time to consider your individual circumstances and whether equity release would be the best investment for your future. Some of the reasons worth consideration are:

• Whether you have any other sources of income that will not be enough to meet your needs in retirement
• You don’t want to or are unable to downsize your to a smaller property
• You don’t mind reducing your family’s inheritance
• You have spoken to a financial advisor and they have suggested equity release is the best option for you

As with any big financial decision, it is important to weigh up all the pros and cons before making your choice. For some, options are limited and equity release is the only way to get by. Therefore, if there are specific money needs you have, such as needing to pay for private medical bills, then equity release could be the right choice. 

The Pros of Equity Release 

• You can keep living in your home
• You won’t have to pay monthly repayments unless you want to
• You will never owe more than your home’s value
• Equity interest rates are extremely low
• You can access the money whenever you need it
• You could avoid paying inheritance tax

The Cons of Equity Release

• Your debt is increased by interest
• You might be subjected to early exit fees
• You can’t leave your home to loved ones as an inheritance
• You have to pay set-up fees
• You won’t be able to take out another load against your property

How to Find Equity Release Advice

If you are keen to find out more advice about equity release, many mortgage and financial advisors offer quality, independent equity release advice. We recommend choosing an independent advisor because they will be more likely to guide you towards a decision that best benefits your interests. What’s more, their advice is regulated by the FCA, providing you with an extra layer of protection. 

Final Thoughts…

Equity release is becoming an increasingly popular way for people to release much-needed funds, particularly since the outbreak of the COVID-19 pandemic. However, it is important to fully consider the impact it will have on your life and your beneficiaries before you make a final decision.  Releasing your property’s equity could completely change your life, bringing significant improvements to your family’s future. But it is important not to rush into such a long-term financial decision.  Only by taking your time, seeking expert advice, comparing the best deals, and talking with your family before committing to an equity release arrangement, will you feel rest assured that it’s the best choice for you.