Managing your retirement finances is by no means the most fun job on planet Earth. Indeed, many of us go to great pains to avoid thinking about later-life altogether. This is a head-in-sand technique that can create further issues down the road. Luckily, there are many ways to approach retirement finance in the short term, equity release ranking highly amongst them. But what exactly is equity release, and how exactly might you use it?
What is Equity Release?
In short, equity release is a form of scheme which enables certain homeowners access part of their home’s value – or the equity they hold in their home – without selling all or part of their home in the process. It might be viewed as a special type of re-mortgaging scheme, wherein you are advanced part of your home’s value in a loan secured against the home. The trick is that this advance, and the interest accrued on it, only needs repaying on the eventual sale of the home.
Equity release schemes aren’t for everyone, though. For one, only over-55s can access such schemes, making them far more useful for later-life applications than otherwise. But what are the specific applications where an equity release might be useful?
Repaying Debts
One of the most common reasons for which equity release schemes are used is the repaying of debt. It needn’t be said that life can be costly, and that even just living day-to-day can create deficits where we least expect them. As someone of retirement age, funds are finite, and debts harder to square away. Equity release soak up that debt and fold it into your home, to be settled when your home is eventually sold.
Home Improvements
Access to a lump sum of equity release cash can also bring major renovation projects within your budget. Your later-life needs may differ from your present needs, and simple additions like step-free access or a powered stairlift can future-proof your independent living. Where such renovations would otherwise be a major drain on your retirement finances, equity release can lighten the load entirely.
Holidaymaking
Accessing your home’s value shouldn’t just be a consideration for the ‘boring stuff’, though, just as your retirement finances shouldn’t be an impediment to you enjoying your post-work life. Getting a lump sum through equity release could give you the funds necessary to book that once-in-a-lifetime holiday, and see some truly special sights.
Disposable Income
Equity release schemes don’t need to result in a lump sum of cash; through certain lifetime mortgage products, you can instead receive an annuity each month – potentially allowing you to better budget your additional money, and stretch it that bit further. As an annuity, you can treat your released equity as extra ‘income’, making day-to-day purchases a little easier to justify.
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