With more and more people using their housing wealth to raise funds for their retirement, 2015 turned out to be a bumper year for equity release sales.
According to the Equity Release Council, lending in the first to the third quarters last year exceeded the total for the whole of 2013, with around £5m of housing wealth being accessed every day.
Thanks to the increasing flexibility of modern plans, equity release is becoming an important part of financial planning for thousands of homeowners in and approaching retirement.
Whilst many turn to equity release to relieve their financial problems, others are unlocking the cash from their homes to improve their property, or to maintain a certain standard of living.
So, with sales continuing to rise, we look in to some of the main reasons why homeowners are choosing to do equity release…
- Home and garden improvements
Making large updates to your property can cost tens of thousands of pounds, but the results can be significant. From adding an extra room to your home to building a beautiful conservatory, installing a state of the art kitchen or converting your loft to provide extra space for the grandkids to stay – you could increase the size and potentially the value of your home by spending the necessary money on it.
- Dream holidays
Special holidays feature regularly on the ‘want lists’ of equity release customers. Dream holidays are synonymous with special occasions, and as we get older it seems there is so much to celebrate. Significant wedding anniversaries and birthdays, hitting retirement, becoming grandparents, all reasons to celebrate life and enjoy a once-in-a-lifetime trip somewhere incredible.
- Clearing credit cards
Unsecured loans and burdening store credit cards can cause stress, sleepless nights, arguments, anxiety and even depression. The worries associated with these debts are very natural and quite common. Many equity release customers choose to unlock a cash lump sum from their home to clear loans and credit cards, leaving them with a larger disposable income each month and a lot less stress.
- Paying off the mortgage
Most of us hope to be mortgage-free by retirement, but for some this is sadly not the case and as a result they have no choice but to remain in employment longer than planned. In fact, almost three quarters of those who expect to be working beyond 65 saying it will be because they cannot afford to retire*. Clearing the mortgage is a common reason for equity release, enabling homeowners to tap into their property’s value to effectively pay for itself.
- Topping up income to help with day-to-day living costs
Not everybody has that ‘one big thing’ in mind when they do equity release. Some just want to be able enjoy their retirement with a bigger disposable income every month, and not have to scrape by to survive. For some, going from a paid monthly salary to a reduced retirement income can have a drastic effect on their standard of living. For those not wishing to downsize, for example, to free up the extra cash, the solution of equity release can be life changing.
- Gifting to loved ones
Today’s climate makes it so hard for first-time buyers to get on – or move up – the property ladder. For those with grown-up children or grandchildren coming to you for help, then you are not alone. According to Lloyds Bank, parents are having to find £13,281 on average for this reason. For people who do not have much to speak of in their savings, equity release could enable them to gift loved ones some of their inheritance now, whether it is for a deposit on a home, university fees or gifting a cash lump sum for their dream wedding.
Equity release is not right for everybody of course, so we recommend you speak to an independent Bower specialist before making a decision. He or she will take the time to explain the advantages and disadvantages of each type of plan; including how equity release will reduce the value of your estate and may affect your entitlement to some state benefits.
How much could you unlock? Use our free, no-obligation online equity release calculator and discover instantly how much tax-free cash you could unlock from your home.
Want to know more about equity release? Speak to a member of Bower’s friendly UK-based team today, on free phone [tel].
*Portus research Dec 2015
This is an equity release plan. To understand the features and risks, please ask for a personalised illustration. Think carefully before securing other debts against your home.
Bower Limited is Authorised and Regulated by the Financial Conduct Authority. Financial Services Register Number: 451607.
