Are you looking for ways to make your home work harder? If so, you’re not alone. Home renovation plans and spending have increased in recent times as more people look to improve instead of move. But another option is equity release, which is a re-mortgaging option for freeing up tax-free cash tied up in the value of your home, without having to sell up.
Equity is the market value of your home minus any mortgage you haven’t paid off yet. Accessing this money while retaining ownership could be a good option if you’re over the age of 55, short on cash and have a property worth at least £70,000. Beyond these requirements, you’re free to take advantage of equity release whether you’re retired or still working.
It’s not a decision you should take lightly however, and it’s advised that you speak to independent professional equity release experts before going ahead. Get a feel for what to expect with our quick summary below.
What can you use equity release for?
The point of equity release is to boost your finances in later life. According to the Equity Release Council, Brits released record amounts of property wealth in 2021.
There might be a variety of reasons why you want to do so, from clearing debts that are hanging over you, to helping loved ones get married or buy a home, for example.
Alternatively, you might want to take that holiday you’ve always dreamed of – or make changes to your home that will allow you to enjoy it for years to come.
Pros of equity release
The main advantage of equity release is having money available now to spend how you want, rather than waiting indefinitely to save up or even giving up on your goals. It could be especially beneficial if your home has increased in value over time, which will be the case for many homeowners given the recent trajectory of the UK housing market.
Equity release also allows you to live in your home for the rest of your life if you want to. You should never owe more than the value of your home and you don’t have to make monthly payments if you don’t want to.
Cons of equity release
A key downside of equity release is that you’ll reduce the value of your estate and therefore the amount of inheritance you leave for loved ones after you die.
Plus, if you choose a lifetime mortgage, the most popular equity release type, the amount you owe can grow quickly due to compound interest. But you could also face charges if you decide to pay it off early as they’re designed to last for the rest of your life – like the name suggests.
Ultimately, the right path for you will come down to things like your age, income, financial needs and future plans. Speaking to a professional will help you understand the long-term picture as well as the short-term gain.
