If you’re over 55 and living in the UK, you’ve likely heard of equity release. This brilliant financial product that’s taking the retirement industry by storm offers a lifeline to those looking for means to fund the cost of retirement.
The reality is that a third of retirees living in the UK have less than £10,000 in their retirement savings, but a leading equity release company could help. So, if you want to avoid working until the day you die, your property wealth could provide a much-needed financial boost.
But, how much money can one access from an equity release loan? Is it enough to be life-changing or just a little to get you by? John Lawson of SovereignBoss, one of the UK’s leading equity release portals, has the answers.
- Equity Release In A Nutshell
- How Is The Loan Amount Calculated?
- Why Does Health Matter?
- Is Equity Release Only Used As A Supplementary Income?
- In Conclusion
Equity release is a type of reverse mortgage for older borrows in that it allows you to access the cash tied into your property. With most older people living in the UK owning homes, it’s the perfect way to gain access to financial support.
Equity release works by your home serving as collateral against your loan. If you have a small mortgage left, you will need to cover this with some of the money you’ve unlocked.
What’s fantastic about these products is that voluntary loan and interest repayments are welcome at any time for new borrowers, but there’s no obligation to make payments in your lifetime. Instead, the loan and compound interest will be paid, usually from the sale of the property, when you pass away or enter long-term care.
The amount of equity that you can unlock from your property will depend on your age, the property value, and at times, the condition of your health.
Homeowners can access anything from 20% to 60% of your property value, and the older you are, the more equity you will receive. The minimum value of your property must be £70,000, so in such cases, you could get anything from £14,000 to £42,000. But, the greater your property value, the more equity will be available.
The loan can eat up your remaining property value due to compound interest, but you can pay off the monthly interest to avoid this from happening.
One of the best features of equity release is how flexible these products are. A brilliant industry innovation is the enhanced lifetime mortgage, designed for illnesses or lifestyle conditions.
With an enhanced lifetime mortgage, you’ll only need to fill in a health questionnaire that your lender will provide. Fortunately, some of the leading equity release companies in the UK offer enhanced lifetime mortgage products.
No, equity release isn’t only designed for supplementary income. In fact, the money you unlock can be used in any way you wish.
However, we at SovereignBoss always encourage homeowners to tread carefully with equity release. You must do some detailed financial planning to avoid wasting this opportunity on frivolous spending, only to have no money in years to come.
There’s nothing wrong with using the money for a dream holiday or home renovations, as long as you have alternative means for retirement. Fortunately, the entire equity release process is done under the guidance of a financial adviser, so you will only be encouraged to unlock equity if it’s in your best interest.
Equity release in 2022 is one of the safest financial products on the UK market. Not only is it overseen by the Financial Conduct Authority, but it has its own regulatory body, the Equity Release Council.
Your best bet is to contact a whole market financial adviser that specialises in equity release, who will help you find the best equity release company to suit your needs.
Disclaimer: MoneyMagpie is not a licensed financial advisor and therefore information found here including opinions, commentary, suggestions or strategies are for informational, entertainment or educational purposes only. This should not be considered as financial advice. Anyone thinking of investing should conduct their own due diligence.