Equity release - your path to a comfortable retirement?

Posted on 9 September 2014 by Michelle Crowe

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Equity release - your path to a comfortable retirement?

Are you sitting on a comfortable retirement? The experts at Key Retirement Solutions talk you through equity release and how it could help you boost your retirement finances.

It has been a difficult few years for people in and approaching retirement. Rock-bottom interest rates combined with steep living costs and pensions that in many cases are lower than expected, have meant that many older people have limited disposable income available.

However, thanks to rising house prices, a significant number of over-55s have a substantial amount of wealth tied up in their homes. If this is the case, have you thought how releasing some of the equity, which could provide a handy lump sum – perhaps to enable you to live a more comfortable retirement?

What is equity release?

Put simply, the value of your home minus any outstanding mortgage, or any other loan secured against it, can be described as your 'equity'. Equity release allows you to release cash from your home, which you can then spend on whatever you like.

Equity release plans are available to most homeowners aged over 55 who are residing in the UK with a home worth at least £60,000. They can be one option to boost your retirement finances if you find yourself 'asset rich but cash poor', like a growing number of people.

Key facts

It’s regulated – the market is fully regulated by the Financial Conduct Authority. It is important to choose an adviser that recommends plans which come with a number of guarantees to ensure your financial safety.

It’s flexible – there are a wide range of plans available, so your adviser should be able to help you to choose a plan which matches what’s important to you.

Remain in complete control of your home –Choose a plan which guarantees that you can stay in your own home for the rest of your life and that you can move home (as long as your new property meets the equity release provider criteria).

Your estate won’t be left with any debt – Most plans come with a ‘no negative equity’ guarantee to prevent you owing more than the value of your home.

It’s important to seek specialist advice – it’s an important financial decision and isn’t right for everyone. A good adviser will help you to explore your options and explain the different plans.

Equity release will reduce the value of your estate and may affect your entitlement to state benefits.

How can I use the money?

The answer is – the choice is yours, however if you decide equity release is right for your circumstances then we always recommend involving your family in your discussions.

The beauty of equity release is that there are no rules as to how you spend the money. People use the proceeds for a whole host of reasons. Improvements for the home or garden, such as a conservatory, a new bathroom or kitchen are popular choices.

Also, popular is paying off loans, credit cards or mortgages. Unexpected bills may have forced you to use a credit card which you then have difficulty paying off, especially if another unforeseen expense arises. (Of course it’s important to consider all the options before taking this decision).

Then there’s the opportunity to enjoy the holiday of a lifetime – perhaps that luxury cruise you’ve always dreamed of or maybe a new car or caravan? Helping close family cope with university fees or to get a foot on the property ladder with their first mortgage are also popular options.

Of course, you don’t have to limit your options. People regularly spend the money on more than one purchase. Do also bear in mind, with some plans you don’t need to take all the money in one lump sum. After taking an initial release amount, you can then drawdown smaller amounts as and when you need additional funds.

After years of working to pay for your home, your home could now start working for you. By taking an equity release plan you could unlock the cash needed to make a difference to your quality of life in retirement.

This is an equity release plan. To understand the features and risks ask for a personalised illustration.

Unless you decide to go ahead, Key’s service is completely free of charge, as their typical advice fee of 1.65% of the amount released would only be payable on completion of a plan.

Think carefully before securing other debts against your home.

This article does not constitute advice, please seek advice from a professional if you are considering equity release.

The blog postings on this site solely reflect the personal views of the authors and do not necessarily represent the views, positions, strategies or opinions of John Charcol. All comments are made in good faith, and John Charcol will not accept liability for them.

John Charcol do not advise on Equity Release and will pass enquiries onto a suitable equity release provider.

Categories: Remortgaging

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The blog postings on this site solely reflect the personal views of the authors and do not necessarily represent the views, positions, strategies or opinions of John Charcol. All comments are made in good faith, and John Charcol will not accept liability for them. We may contact you in response to your comment – by submitting your comment, you are consenting to this.

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