More and more people are now using their property to help fund their retirement. They turning to equity release to provide a lump cash sum in return for a share of the equity in their home.
Many people who are currently considering retirement have been fortunate enough to see the value of their home increase over their lifetime, and therefore have cash locked up in their property. Equity release is a way to unlock that cash.
Equity release as a way of funding retirement is growing at over 20% in this year alone. As Dr Ros Altmann the Director General of Saga points out, ‘It may tell us that a lot of them have been disappointed with the pensions they have saved for, which have not worked out as they had hoped.”
Fewer people now trust pension schemes, as high management fees and poor returns eat into their anticipated retirement income. Only 30% of people working in the private sector save into a pension scheme and one third of 60-65 year olds have no pension provision other than the state pension.
Equity Release Explained
Equity release companies offer people with valuable houses, a lump cash sum in return for money tied up in the equity in their house. The amount that homeowners choose to take out, is then deducted with interest by the equity release company from the proceeds of the house when it is sold.
How Do Homeowners Use An Equity Release Mortgage?
So what are home owners doing with the cash they release?. In a recent survey by equity release provider Stonehaven, the top reason for taking out an equity release product was to pay off their mortgages. This is effectively taking out another mortgage to pay off the existing mortgage, but which has the advantage of taking away the monthly repayments. Eighty per cent of financial advisers surveyed said they their clients had used their equity release mortgage for this reason.
The second most popular option is using a home equity loan to fund home improvements. The third reason is giving children and grandchildren a helping hand. With many young people still finding it difficult to save for a mortgage deposit, the older generation are unlocking cash in their own properties to give them financial security knowing the debt will be repaid when they die. .
Equity Release Advice
At equity-release.me we aim to provide clear independent advice on equity release, to enable you to take an informed decision as to whether equity release would be the right move for you. In our equity release guide we describe the advantages and disadvantages, and explain the many equity release schemes so that you are properly informed.