What is equity release, and how could it benefit you? This guide provides real-life examples of some of the most common reasons people use it and explains how it works.
Equity release can be a viable option for retirees and older homeowners looking to access the value tied up in their homes. Whether you’re aiming to support loved ones, improve your living space, or secure your financial future, equity release offers flexibility and possibilities worth exploring.
What is equity release?
Equity release allows homeowners aged 55 or over to access the equity (money) tied up in their property without needing to sell their home. To be eligible for equity release, your home must be worth at least £70,000, and you must be a UK resident.
With modern equity release schemes, there’s no need to move out or sell up. Most importantly, the equity release plans we offer through our trusted partners, Mortgage Advice Bureau, come with safeguards to ensure you can live in your home for as long as you wish. But like any big financial decision, equity release requires careful consideration.
Examples of how equity release can help
Here are some examples of the most common reasons our clients have proceeded with equity release schemes this year…
Helping family members
Equity release can be a solution to gift funds to support a family member. One of our clients, a gentleman in his 70s, wanted to gift his daughter £300,000 to help her buy her first home – a larger property where she could raise her children comfortably. By accessing a portion of his home’s value, he provided meaningful support that improved his daughter’s and grandchildren’s lives.
Home improvements
Another client needed home upgrades due to mobility challenges. She used equity release funds to install a downstairs bathroom and modernise her old kitchen, making it more accessible and user-friendly. Equity release allowed her to adapt her living space to match her needs without compromising her lifestyle.
If you’re a homeowner looking to maintain or improve your comfort, equity release could provide the necessary funds to make your home work better for you.
Clearing an interest-only mortgage
If you have an interest-only mortgage, it might feel overwhelming to manage looming repayment deadlines, especially if unexpected changes occur.
One of our clients discovered that his interest-only mortgage term was ending in just three weeks, and the new interest rate would triple. Equity release provided a practical solution, allowing him to pay off the mortgage entirely.
What’s more, because he is still working, he opted to make voluntary monthly payments on the equity release plan, benefiting from a discounted interest rate. This flexibility allowed him to secure a better financial outcome while staying in his home.
Switching to a lower interest rate
Some people switch equity release schemes to secure a lower interest rate and save money. Many people are unaware this is an option, but equity release plans have evolved significantly over the years, becoming much more flexible and cost-effective.
For example, a client who had an older equity release plan with an 8.75% interest rate was able to switch to a new plan at 5.95%, saving a substantial amount of money over time.
What makes equity release plans flexible today?
Modern equity release plans come with features designed to suit individual needs, such as:
- Voluntary payments: You can choose to make monthly payments to reduce or stop the interest from compounding. This can lead to significant savings in the long run.
- No negative equity guarantee: You’ll never owe more than the value of your property, protecting your estate.
- Portability: Want to downsize? You can move your equity release plan to a new property.
These flexible features make equity release an increasingly viable option for homeowners seeking tailored financial solutions in retirement.
When is equity release the right option?
While equity release is suitable for some homeowners, it’s not suitable for everyone. Factors like your long-term financial health, family considerations, and homeownership goals must be considered.
We will look at your unique situation and explore all potential options, including standard or retirement interest-only (RIO) mortgages. We aim to ensure you make the best decision for your needs and goals.
We’ll walk you through your options and help you decide if equity release is right for you. Contact us today for more information and our equity release specialist, Steve Dale, will be happy to help.