Monday, December 10, 2018
Equity release among older UK homeowners is now common. In 2017, the Equity Release Council found that the growth rate reached a 15-year high. Many people have found a way to retire in comfort even after their income drops substantially. Many UK retirees find themselves with rich assets, but they do not have the cash to keep them going. Further, a majority of their wealth is often stuck in their homes, and equity release is a way of unlocking this wealth. However, you should always seek advice from professionals such as responsibleequityrelease.co.uk before venturing into this scheme. This article looks at four reasons to seek responsible equity release in the UK.
1. You do not have to move. Many people free some of their home wealth by downsizing to a cheaper and smaller house. The same people would want to stay in their family home after retirement. Moving is stressful. Equity release eliminates all these hustles and allows you to stay at your family home but unlocks some of your housing wealth. You are not required to pay monthly instalment, as with the case with a regular mortgage. The interest in equity release rolls up, and the plan finishes either when you and your partner die, or when you move into long-term care. When the program ends, the interest plus the original amount of the loan is paid back to the provider. Equity release reduces the value of your property and this affects any inheritance you would want to leave your loved ones. The scheme would also affect your entitlement to state benefits.
2. You need to repay Loans. Some older homeowners will use equity release to clear debts or pay off outstanding mortgages. In most instances, these are interest-only mortgages, and homeowners have difficulties repaying the debt. In some cases, the homeowners have not saved enough to compensate the capital or the savings plan they took to cover the debt have not performed as they had hoped. Equity release offers a quick way to get out of debt.
3. Access to Funds for Personal Use. Finding a significant lump sum of money in retirement can be challenging if you have not saved enough. Many people turn to equity release to get funds for personal use such as home improvement or to help their children financially. According to a study by Responsible Life, an equity release specialist, one out of five retired homeowners, release equity to support their family members.
4. Top up your Monthly Income in Retirement. You do not have to use your equity release to pay debts and fund projects. Some people release equity to top up their monthly income. For example, drawdown plans, the most common type of equity release, allows you to withdraw money in stages and when you are in need. The scheme charges you interest only on the amount you withdraw thus making it cheap.
Remember that the amount you get from equity release is tax-free. However, if your place this amount in a savings accounts, or invest, a tax is payable on any interest you gain.