With the current cost of living crisis affecting families across the UK, people are coming up with novel ways of easing financial pressures. One way that homeowners can obtain much-needed cash is by releasing equity from their property. This may not be a solution for everyone, but it can be a viable option for those aged 55 and over. With some homeowners struggling to cope with rising energy and food prices, it can be worth considering.
What is equity release?
Releasing equity enables an older homeowner to access the cash tied up in their property. This money can be drawn as a lump sum, in several instalments, or even as a combination of these options. The positive aspect is that there is no obligation to repay the money, as this sum is usually repaid when the homeowner goes into care or passes away and the home is sold. You have the right to remain living in the house until you pass away, but you must ensure the maintenance and insurance are kept up to date.
What is a lifetime mortgage?
As property prices have remained high across the UK, many older owners have benefited from the chance to cash in on the value of their homes and tap into this very valuable wealth source. Older owners will sign up for a lifetime mortgage, which is a loan secured on the home. It frees up some of the wealth and you can ring fence some of the value to use as an inheritance.
Beneficiaries may have to pay back any extra cash above the value of the property from the estate; however, it is important to understand that most lifetime mortgages include a no negative equity guarantee, which means a beneficiary will never have to repay more than the value of the property.
What benefits are there amidst the current cost of living crisis?
Homeowners can use a release to clear credit card debts or increase their disposable income, which can give them greater financial freedom and enable them to enjoy a better quality of life during their retirement. The money borrowed can be spent in whatever way the homeowner chooses; for example, the funds can be used for luxury holidays, cruises, university support for grandchildren, or even as a deposit for a home for a family member.
They could also choose to spend it on home improvements, a new car, or gifts for family and friends.
If equity release is something you are considering, you will find a range of professionals who can help you to begin the process. The Scottish Sun useful facts about equity in the home and the benefits of releasing cash.
Is this release right for me?
Before launching into a cash release, it is important to understand what you are signing up for. It may not suit everyone and will reduce the amount you can leave to your children and grandchildren. You may eventually owe more than the value of the property unless the mortgage has a no negative equity guarantee. A release may affect your taxes and any means-tested benefits you receive. Also, a lender will want to ensure the property remains in good condition and you might need to spend money to achieve this.