With the equity release industry celebrating its historically biggest year in 2021, the sector continues to expand and aid more UK retirees. In quarter 3 of 2021 alone, £1.15bn was released by older homeowners, allowing them to live a vastly more comfortable retirement.
But, does releasing equity from your home give you enough money to last a lifetime? While the answer isn’t clear, we can explore the possibilities. Here’s more.
What Is Equity Release?
If you’re not yet aware, equity release is a leading financial product designed to allow homeowners older than 55 to unlock the cash tied into their property while still living in it. The loan and compound interest are repaid from the property sale when the last homeowner dies or enters long-term care. The UK’s two most common forms of equity release are a lifetime mortgage and a home reversion scheme.
The cash you release is completely tax-free and can be used in any way you wish.
How Much Money Can You Access with Equity Release?
The amount of money you can access with equity release depends on your age, the condition of your property and its value, and the state of your health. Following the advice of John Lawson, an Expert in Equity Release from SovereignBoss, this calculator: https://sovereignboss.co.uk/equity-release-calculator/ will help you discover how much money is tied into your property.
How Do You Discover if Your Equity Release Income Is Sufficient?
Let’s be honest; there’s no way of knowing how long you will live, and as such, it’s impossible to determine if the equity you unlock will be enough to fund your retirement. However, if you opt for equity release, you will generally have the opportunity to unlock up to 50% of your property value. In equity release terms, this is known as loan-to-value (LTV).
With the average property price in the UK sitting at £264,000, you could stand to unlock up to £132,000. Furthermore, with equity release, you will have rent-free accommodation.
There Are Ways to Save with Equity Release
While equity release costs between £1,500 and £3,000, plus compound interest, there are ways to reduce the overall costs. One of the best ways is with a drawdown lifetime mortgage, the most popular type of equity release on the market. With a drawdown lifetime mortgage, you can take an initial lump sum, with the balance going into a cash facility. From there, you can withdraw money from the facility whenever you wish.
What’s great about this is that you’ll only pay interest on the money you unlock. In addition, you can control how much equity you release, saving for a rainy day.
So, Can Equity Release Secure Your Retirement Finances?
The answer depends on how much money you’re eligible to unlock, what you use the cash for, and how long your life lasts. Once you’ve tried an equity release calculator, meet with a financial adviser who will talk you through the equity release process. In addition, your advisor will talk you through the equity release risks and alternatives, helping you find the means to unlock the retirement you’ve always dreamed of.
