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How Equity Release Could Give You Your Dream Retirement Life

27th June 2022

Saving for your retirement is one of the most important financial plans you will ever make. This isn’t just a consideration older people should be making – the earlier you start thinking about this and saving money, the better off you’ll be in the future.

However, when you are older, there are options to access the cash tied up in your home (if you are over the age of 55). If you own your own home and are considering selling it for a comfier retirement but don’t want the hassle of moving and relocating, equity release might be the ideal solution for you.

Here, we provide some equity release advice so you can unlock tax-free cash from your home to fulfil your retirement dreams.

What is equity release?

In simple terms, equity release unlocks a cash lump sum from your home while you are still living there. But how?

You can do this via a number of policies, and the bonus is that your mortgage doesn’t need to be fully paid off. If you don’t have anyone to inherit what you leave behind when you pass away, it’s a route for many to raise cash. If you do have people that you’re planning on leaving assets to, they will inherit less. However, as this is your money, consider your own circumstances and standard of living.

The amount of equity that people are able to generally unlock is between 20 per cent and 50 per cent of their property value. Your property must be worth at least £70,000, or your application may be rejected.

There are two types of equity release products:

  • Lifetime mortgage

This is the most popular product and is available to those aged 55 and over. It allows you to borrow a portion of your home’s value at a fixed interest rate. Interest compounds rapidly as the money you owe back is constantly increasing, similar to a mortgage. When you pass away or move into long-term care, your home will be sold, and the money made from the sale will pay off the rest of the loan. Anything left over will be left to people in your will.

  • Home reversion plan

For this product, you need to be aged 65 and over. You would be paid a tax-free lump sum for a portion of your home at below market value. This part of your home would belong to someone else while you continue to live in it until you pass away or move into long-term care. When the house is sold, the money is split based on the percentages you and the lender owns.

What are the benefits of equity release?

Many of us are living longer and so need more retirement money to support our living costs. Here, we look at the benefits of equity release.

Reduce your monthly outgoings and repay debt

When we retire, our monthly income drops. Payments towards our mortgages, loans, purchases on credit, and debt become more difficult – equity release can reduce these outgoings with a finance plan that doesn’t require monthly payments. These will be paid off from the cash locked up in your home after you pass away.

You’ll have noticeably more cash flow and a retirement with more flexibility and freedom.

Add to your pension, or make it your pension

If you’re struggling to live on your pension payments, you can top up your pension with a lump sum of cash or smaller monthly payments from your home.

Your pension isn’t part of your taxable estate concerning inheritance tax. You can use equity release to actually fund your retirement as a tax-free alternative to your pension. If you don’t withdraw your pension, you can see additional growth on your investment. Your pension pot can be protected and passed down to beneficiaries of your will, free of inheritance tax.

Being able to live to a higher standard of life

After raising a family or focusing on our careers, when we retire, we want to spend our later years focusing on ourselves and fulfilling our dreams. This could be travelling the world, making our house our dream home, or picking up a new hobby.

Equity release could be the answer to you wanting to fund your dream lifestyle – after all you’ve spent a large portion of it working. You deserve to look after number one and do all the things you want to do now.


The content of this factsheet is for general information only and should not be considered advice.  Professional advice relating to your individual circumstances should always be sought prior to making any decisions or taking any action. Equity Release is not suitable for everyone. You should seek advice to ensure that you fully understand all implications for you and your home and for anyone who might otherwise inherit the property.  All details were correct at the time of writing. 

Sources:

https://www.moneyadviceservice.org.uk/en/articles/lifetime-mortgage

https://www.moneysavingexpert.com/mortgages/equity-release/

Reference – BL146-Jun-2022

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