Financial stability is a critical aspect of enjoying your golden years. As you approach your senior years, the need for a life of comfort becomes more demanding. After all, you’ve worked all your life and could now use a break. There are many ways of ensuring that you fill your sunset years with joy, relaxation, and financial freedom. The equity release mortgage is one of the means through which you can get creative about affording the better things in life in your sunset years.
So, what’s the financial knight in shining armour about?
Well, equity release is the best financial mortgage that allows you to unlock the value of your estate by turning it into a lump-sum1 or monthly income. It’s accessible to homeowners aged 55 and above, those who won homes within the remits of the UK and whose estate value clocks more than €70,000.
Benefits of Equity Release
Financial freedom is the most significant benefit of equity release. Many retirees want money to afford several things, be they the much-needed home improvement projects, university fees for their grandchildren, and vacations, to mention a few. Relying on government benefits and other irregular sources of income, such as part-time work may not always work for a senior who has numerous financial demands.
Imagine selling your home and still being able to live in it—this is perhaps every homeowner’s dream. With home reversion, which is a type of equity release2 arrangement, you can give up your home to someone else, get paid, and continue to live in your house. This arrangement opens up your financial possibilities and rids you of the obligations of owning a home while still allowing you to live rent-free.
Do you want to gift your heirs your estate while you’re still alive? You can achieve this using equity release. Borrow against your home and channel these funds to your heirs’ bank accounts. This way, they can celebrate this gift while you’re still alive to see it. What’s more—equity release can also lower the Inheritance Tax3 on your property. By selling some part of your property to someone else, you reduce your equity value, and if that falls below £325,000, there will be no tax charged on the same.
Dis-Advantages of Equity Release
One of the most significant disadvantages of equity release is that interest repayments can add up over time. As such, a homeowner may find himself or herself owing the lender the entire value of their home by the time the equity release plan comes to an end. Under the no-negative equity guarantee4 clause, there’s an assurance that your debt will never go beyond the value of your home. That doesn’t mean that you won’t lose your house entirely in the end as the accumulated debt may be at par with the house’s future value.
With the home reversion plan where you sell all or part of your home to a third party, you may miss out on house-price increments. If the housing market in your region grows significantly over time, you’ll not be able to reap the benefits of such an environment. Such a scenario happens because you have primarily sold all or part of your home to someone else who will benefit from these house-price booms.
Equity release is a good bet for retirees who want financial freedom but still wish to continue living in their homes. It’s vital to select a reputable plan provider to work with and make sure that you read between the lines, as the devil is often in the details.