Record Numbers of Over 55’s are Using Equity Release. But is it a Good Idea?

Over 40,000 people used equity release in 2019 to fund their retirement releasing more than £3.4 billion*** in tax-free cash. Here’s why...

By Wendy Kerr
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Equity Release is becoming more and more popular in the UK with homeowners in the 55+ age bracket and it’s not surprising!

By the time people reach their retirement, they often don’t have enough money saved up to live the life they imagined. One of the main reasons for this is that they invested a lot of their hard-earned money into paying off their mortgage so most of their wealth lives within their home. 

Equity release gives these people an easy way to access that wealth as tax-free liquid cash that they can use to spend on whatever they like!

Here’s what most people are using it for:

With equity release rates hitting record lows, there’s never been a better time to take advantage of this opportunity. Provided you qualify, you can usually access tax-free cash within 4 weeks – the process is relatively easy & straightforward.

To find out how much equity you could release, take our FREE online assessment (takes 30 seconds).

If you are thinking about equity release, you’re not alone.

BUT… With that being said, it’s crucial that you do your due diligence so you release the right amount, at the right rate, safely, and on your terms.

That’s what the rest of this article is about. We’re going to look at some of the most common misconceptions surrounding equity release, a couple of good alternatives and some expert tips if you’d like to take the next step.

Already interested in taking the next step? Find out how much tax-free cash you can access with our FREE online equity release calculator.

Common Misconceptions

Equity release is one of the most regulated financial services for over 55’s. It hasn’t always been that way though and despite over 40,000 customers last year, many continue to have mixed opinions on the plans available. These are the most common misconceptions: 

You can lose your home or get kicked out - FALSE

This is the most common misconception and for good reason – getting kicked out of your home is a scary thought. There are some horror stories out there but all of these cases happened BEFORE the industry became heavily regulated by the FCA.

Today, it’s NOT possible because of the no negative equity guarantee. You can never lose your home and you’ll always have permanent tenure until you pass away or enter long term care. 

Monthly repayments are too high - FALSE

Interest rates for equity release currently start from 2.23%* (that’s cheap money!). The current average is around 4.9%*, to get an estimate on how much you could release and the rates involved you can click this link.

Rates are brilliant at the moment but the real misconception here is that if you choose to, you don’t have to pay any monthly interest at all! Instead, the interest can come directly from the equity of your home so there’s nothing for you to physically pay. 

There'll be no inheritance left for the kids - FALSE

By choosing equity release, you’re going to reduce the amount loved ones inherit but there’s a couple of caveats here.

Obviously, this only matters if you have loved ones you’d like to leave something for. If you don’t, why miss out on a better retirement? Find out how much you could release with our free online calculator

What are the Alternatives

Equity release doesn’t make sense for everyone. But if you still need extra cash for your retirement, here are a couple of alternatives:

Downsize Your Home

In an ideal world, you would downsize your home to make more funds available. Provided you find the right place, it will be the most economical option for you long-term.

But, it’s not a great option for everyone. Some people would prefer to remain in their current home where they’ve lived their life and built up memories. Plus, they won’t have to go through the stress and hassle of selling up, buying and moving into a new home. 

Get a Lodger

Most people who are 55+ that own their home are generally empty nesters. Their children are grown up and have left the family home so there’s usually a spare bedroom or 2. Why not take advantage of this space and rent it out to a lodger to save up additional cash?

The UK Government actually offers a The Rent a Room Scheme, which lets you earn up to £7,500 per year tax-free** from letting out furnished accommodation in your home.

It’s a great idea but having a lodger comes with its own hassles and compromises. 

Expert Tips

If you’re considering equity release, here are some expert tips: 

How much cash could you access?

The minimum amount of equity that people can withdraw from a property is £10,000. The maximum will depend on the age of the homeowner but it can reach up to 50% of the property’s value.

Want to find out how much you could access? Simply complete the online assessment below (takes 30 seconds) to generate a free estimate. 

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How much tax free cash could you unlock with equity release?

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Disclaimers:

*Rates taken from https://www.equityreleasesupermarket.com/compare-deals.
** Gov rent a room scheme: https://www.gov.uk/rent-room-in-your-home/the-rent-a-room-scheme.
*** Numbers taken from Key’s quarterly & annual market reports: https://www.keyadvice.co.uk/about/market-monitor

Equity Release Expert is a trading name of Digital Roo Ltd. https://www.equity-release-expert.co.uk is a website solely used for marketing and no advice is provided directly from this site. Equity Release Expert introduces you to a suitable Partner that can help give you individual advice and match you to the right solution for your personal circumstances, we are paid a fee for the introduction.

There may be a fee for mortgage advice only if you decide to proceed. If you are thinking of consolidating existing borrowing you should be aware that you may be extending the terms of the debt and increasing the total amount you repay. The exact savings you could make from remortgaging & equity release will vary depending on your circumstances.

Calls may be recorded for training purposes. The lender and or broker may charge a fee of 0% up to 7% on your loan.

THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT. IF YOU ARE THINKING OF CONSOLIDATING EXISTING BORROWING YOU SHOULD BE AWARE THAT YOU MAY BE EXTENDING THE TERMS OF THE DEBT AND INCREASING THE TOTAL AMOUNT YOU REPAY.

Nothing on this website constitutes financial advice. However, we do look to match you with the right financial advice so you can speak to a qualified financial advisor. This website provides information only, and the choice of product is for you alone to choose. As an introducer we process the information you provide us and we may pass this onto our trusted third party lenders and brokers. All credit is subject to you being a UK resident, aged 18 or over and subject to your personal circumstances. All lenders operate responsible lending policies and as such credit is subject to status and affordability.

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