Homeowners have a bit of a conundrum on their hands. You spend years paying off a mortgage, only to end up with an asset whose value you cannot access without selling it, essentially locking away cash that you could put to better use in other ways.
This is where equity release is appealing, as it allows you to free up some of the money that’s held hostage by your house. If you are on the fence about whether equity release is right for you, here are just a few reasons why it might be advantageous.
To fund your retirement lifestyle
The primary purpose of harnessing this type of loan is so that you can retire without facing a future riddled with financial uncertainty.
Whatever the size of your pension, equity release can help in retirement by giving you a sizable injection of cash which you can use for whatever you wish.
Perhaps you have always dreamed of going on a trip around the world, or perhaps you want to carry out some home improvements so that your property is a nicer place to be.
Regardless of your aims for your lifestyle after retirement, equity release can fund them and give you freedom in the process.
Best of all, the equity you unleash is tax-free. You just need to remember that interest will be compounded over time, and this will be deducted when the house is finally sold after you pass on or are moved into sheltered accommodation.
To pay off your mortgage
While equity release is often targeted at people who own their homes outright, deals are still available to homeowners who still have a chunk of their mortgage left to pay off.
Using equity release in this way means you don’t have to keep committing cash from your pension payments to cover your mortgage. This will give you more disposable income month on month, in addition to the lump sum of the loan itself.
Indeed it is typically a requirement of equity release products that your existing mortgage is covered by the loan amount, so keep this in mind when looking into calculations of how much you will receive.
To help out loved ones
One of the often-overlooked advantages of equity release is that it means you can provide significant financial support to the people you care about most while you are still around to see them enjoy the money.
The alternative is of course relying on their eventual inheritance to help them, but since there is no way of knowing when this time might come, and the cash might be better spent now rather than left languishing in the value of your home, equity release gives you an alternative avenue.
A great example of using equity release in this context is as a way to enable younger members of your family to afford the ever-growing deposits needed to make their own first home purchase.
You could also release equity from your home to reduce the amount of student debt that a child is facing at the end of their education.
All of these reasons and more might strike a chord with you, and if they do then there has never been a better time to look into equity release schemes.
Property prices have jumped up consistently over the years, and your home could be the key to financial stability for you and your family, especially post-retirement.
So long as you weigh the benefits against the downsides, such as the interest that is payable when this type of loan is paid off, it could be perfect.