The equity release industry has really been booming since 2017, and there is good reason for it. There are a number of reasons as to why homeowners would choose to release equity from their home, and now there are more reasons than ever with the current economic climate.
What is equity release?
For those who are unaware, equity release refers to a financial product which allows homeowners to access the equity (cash) which is tied up in your home. This is only possible if you are a homeowner who is over the age of 55.
You are able to take the cash out in one lump sum or you can get it in several smaller amounts, or simply a combination of both.
Sounds great – but what are the main reasons as to why to people use them? In this guide, we are going through this so that you can make an informed decision as to whether equity release may be the best option for you and your financial aims and needs.
In 2018, over 80,000 equity release mortgages were taken out, equalling a total of £3 billion lent out in the UK. There are a handful of equity release providers in the United Kingdom including Sunlife, Age UK and Access Equity Release.
Many people choose to complete home improvements with the money which they release. This may be for aesthetic reasons or it may be to adapt the home for retirement.
Clearing debts and mortgages
Many over 55’s choose to consolidate their debt by releasing equity from their home. Thanks to equity release, gone are the days when mortgages and credit cards are cleared by the time you reach your fifties.
For the majority of people, paying you their mortgage is going be at the top of their priority list – if not in first place for those who took out interest only mortgages years ago.
Helping family members out
Equity release is commonly used to help out the family of the homeowners. The most common reason will be to help their children get themselves on the property ladder, but other reasons such as funding education or medical treatments also feature heavily as a theme.
Alternative to a pension
It is common to use equity to boost income in the later years or even to replace a pension. The cash which is released can aid them in maintaining or improving their lifestyle whilst they are no longer working.
Private pension savings are rather inadequate and with people living a lot longer, often it is the case that help is needed on a much more regular basis to make ends meet.
Click here for information about an equity release calculator.