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How equity release could help you

Giving yourself greater opportunities

Some people see equity release as a way to handle a possible shortfall in their retirement income, without having to downsize their home. Often they have a specific purpose in mind for the money they want to release. This could be a special holiday, for instance – perhaps with other family members – to a part of the world they’ve always wanted to see.

Making improvements in the home or garden is another popular option, as people look to make the most of the places where they can now spend more time. Similarly, retirement offers the opportunity to pursue new hobbies, some of which may require a little extra funding.

Although many of us have particular intentions such as these, equity release can also be used to provide a reserve of cash for the future – maybe after some major expenses have been met, or existing debts have been cleared.

Here are some popular reasons for taking a lifetime mortgage

  • Adapting the home to enable independent living
  • Renovating or refurnishing, from a new kitchen to a new roof
  • ‘Topping up’ retirement income - making life more comfortable
  • Paying for funerals
  • Paying medical bills, home care or legal fees
  • Buying a new car, motorhome or caravan
  • Funding hobbies and leisure activities
  • Helping children and grandchildren with house deposits, student fees, weddings and other major events

John and Beryl, Mid to late 60s

Want some extra money to make the most of their retirement.

Please note that this is not a real-life example.

Married in their late teens, retired bus driver John (67) and former shop worker Beryl (68) bought their house in Leeds for £30,000 not long into their marriage. Their two children now have families of their own, and live nearby.

John and Beryl have always lived a fairly frugal lifestyle, but with the family’s needs always being top priority as the children were growing up, saving took a back seat. And with only State pension to rely on, they now only have enough money for a fairly restricted standard of living in retirement.

However, John and Beryl have one big thing in their favour: their house. They’ve been pleasantly surprised to find that it’s now worth £200,000. Having ruled out downsizing due to their emotional attachment to their home and network of friends nearby, John and Beryl agree with their children that equity release might be a way to free up some extra money to treat themselves to some things they never thought would be within reach. They want to borrow £30,000 to cover the cost of a caravan and home improvements, as well as setting aside £20,000 in a reserve facility that will help top up their income over the next few years.

They’re not planning on repaying the lifetime mortgage before they die, but they’d like to have the option of making partial repayments in the future, if circumstances change and either they or their children choose to do so.

What should I consider?

It’s your decision

We encourage you to talk to family members before deciding on equity release, no matter how you plan to use the money you access. But remember, it’s your home, so the decision is yours to make.

Stay in your own home

Unlike raising money through downsizing, taking out equity release allows you to stay in your current home.

It’s a big commitment

First of all, you need to make sure you’re comfortable with everything that’s involved in taking out a lifetime mortgage. It’s a lifelong commitment, and if you choose to end your lifetime mortgage early you may have to pay substantial early repayment charges. Releasing money from the value of your home could also affect your tax position and eligibility for welfare benefits.

There are no monthly repayments. Instead, interest is added to the loan and to any interest previously added each year. This quickly increases the amount you owe. The loan and interest are repaid in full, usually from the sale of your home, when you die or go into long-term care, subject to our terms and conditions.

Thinking about inheritance

You can choose a lifetime mortgage with an inheritance guarantee, which will safeguard a percentage of your home’s value to pass onto your loved ones. This will cut down the amount you can borrow though, and even with an inheritance guarantee, taking equity release will always reduce the amount of inheritance you can leave.

Interested in equity release, but not sure how to apply? See the whole process in 3 steps.

Here are other guides to explain how equity release could help you, and what to think about before you apply.

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