What can I use Equity Release for?

Many people entering later life find themselves in a position of being asset-rich but relatively cash poor. If you own your home, your net worth may be significant, but you don’t have as much disposable income as you would like. If you find yourself in this situation, you can use equity release to help you enjoy a more comfortable retirement.

With a Lifetime Mortgage, you can free up some of the value locked up in your home. Any equity released provides tax-free cash for you to do some of the things you have always dreamed of.

If you’re wondering what can I use equity release for then here are some of the reasons why people consider releasing equity.

10 Uses of Equity Release

You can spend the cash released through a Lifetime Mortgage however you wish. Here are ten popular uses for releasing equity:

1. Paying Off Existing Debts

If you have an existing mortgage – perhaps an Interest Only Mortgage that is due to end soon – you might be able to repay it with a lifetime mortgage. Loans, car finance and credit card debt can also be paid off.

Many people find they can enjoy their retirement better when they do not have to worry about monthly debt repayments.

As you do not have to make any capital or interest payments on a Lifetime Mortgage during your lifetime, this can be a great way to consolidate your debts. In turn, this will give you more disposable income throughout retirement.

2. Home or Garden Improvements

Home improvements are amongst the most popular uses of equity release. Many of our clients love their homes but feel it is time to give a tired kitchen or bathroom (or even the whole house) a makeover. New triple-glazed windows and better insulation can make a big difference to older properties. Sometimes it is the garden that needs attention.

Perhaps you have dreamed of a new conservatory or even a full-blown extension. Equity release could help you turn your ‘forever home’ into your grand design.

3. Holidays

Many people dream of going on the trip of a lifetime when they retire. Others wish to escape the British weather and spend a few weeks in the sun every year, maybe in a holiday home.

Some of our clients live life to the full by having skiing, cycling, trekking and other activity holidays.

Where would you go?

4. Buying A New Car

There are many reasons people purchase a new car in retirement. Maybe it is the first opportunity to treat yourself to a brand-new car – one kitted out to your exact requirements. Maybe, you need a vehicle that is more comfortable and reliable. Or perhaps you need something more suitable for taking your dogs on a long journey, or ferrying grandchildren, pushchairs and other paraphernalia. Is it a second car, such as a cabriolet or a classic car, you have always dreamed of?

5. Increasing Retirement Income

A lifetime mortgage can offer you extra income in retirement either through a regular payment plan or with a drawdown facility. With the latter, you take an initial lump sum and then make additional withdrawals whenever it suits you. Many people find this flexibility a great way to boost their income and improve their lifestyle throughout retirement.

6. Helping Loved Ones

Equity release can be a fantastic way to gift those you love a ‘living inheritance’. A popular reason for this is to help children or grandchildren onto the property ladder. With the spiralling costs of university education, helping to fund higher education for the grandchildren is another reason for gifting.

Making a gift now can be the best of both worlds – your loved ones get help when they most need it, and you enjoy seeing the difference it makes during your lifetime.

7. Emergency Funds

After using the initial lump sum, our clients often keep an extra amount available in reserve with a Drawdown Lifetime Mortgage. As interest is charged only on cash drawn down, untapped funds can provide an ideal safety net. You can usually access any remaining funds with just a few days’ notice.

8. Buying A Property

An increasingly common use for equity release is to fund a property purchase. The three types of property bought in this way are:

1. A new home. It might be that the new home is more expensive than the one being sold. In other cases, people want to pay for alterations that make their new property comfortable for retirement. Have you always wished for a better property, maybe with a bigger garden or perhaps one with a sea view?
2. A holiday home or second property – perhaps one near your family or friends.
3. Rental property. If you already have some buy-to-lets, you can use a Lifetime Mortgage to add to your portfolio or pay off existing BTL mortgages. Rents can provide a valuable additional income in retirement.

9. Healthcare & Care Fees

There are many possible reasons for funding healthcare with the help of equity release. Perhaps you have been considering cosmetic surgery or dentistry. Maybe you or a loved one could benefit from a private operation unavailable on the NHS, or the waiting list is too long.

Some retirees wish to pay for private medical cover – something their employer may have paid for until retirement and will become increasingly expensive in later life.

Should the worst happen, and you suffer a life-changing illness or injury, equity release can provide emergency funds at a critical time. For some, this will mean being able to afford a private medical examination or treatment. For others, it might be adapting their home or paying for domiciliary care costs.

10. Inheritance Tax Planning

The growth in house prices has traditionally outstripped any government increases in inheritance tax allowances. This is especially true in London and the South East of England (where Advice for Later Life are based). For those wishing to provide the maximum inheritance for their loved ones, Inheritance Tax (IHT) can be a worry.

Equity release can be a way to reduce or entirely mitigate the risk of an eye-watering inheritance tax bill. Many Lifetime Mortgages allow you to ringfence some of the value of your home and, therefore, guarantee your beneficiaries receive an inheritance.

Please note that Inheritance Tax Planning is not regulated by the FCA.

What you can’t use Equity Release for

As you can see from the top ten uses above, you can release equity for almost anything to make your later years more comfortable and enjoyable. With the right advice and careful planning, you may be able to use it for several different uses throughout your retirement.

However, as a Lifetime Mortgage is a loan secured against your home, there are some limits. For example, it would not be sensible to spend the cash betting on the Grand National or gambling in a casino!

Likewise, taking a punt on stock markets and related financial investments can be very risky. The risk is worse later in life – when you have neither the income nor the time to smooth out or absorb any shortfalls.

Equity release is not suitable for everyone, so it is essential that you seek expert advice.

How to find out more

If you’re over 55, own a home worth at least £70,000, and want to know if equity release is right for you, please contact us.

Prefer to call us? please contact Adrian in our Sussex & Hampshire office or Dylan in our London & Surrey office.