Transform Your Later Life
Unlock the cash tied up in your home to pay off debts or help your family, says Paul Lewis.
There’s little point sitting in a home worrying about your bills and how to afford the good things in life when you could turn some of its value into cash and spend it now – on essentials, on fun, or indeed on helping children or grandchildren buy a home or get a better education. It’s called equity release – it really needs a better name – but all that means is that you release some of the value locked in the bricks and mortar you live in, and have that money in your bank account instead.
Suppose your home is worth about the average £250,000. You borrow, say, £50,000. You are charged interest on that loan, but while you’re alive you don’t pay it. Instead it’s added to the debt each year. When you die, your heirs sell your home, pay off the debt and keep the rest.
Find out how much you could release with this free calculator
Free guide to equity release written by RT's Paul Lewis
The debt will grow fairly quickly because each year you will start paying interest not just on the debt but also on previous years’ interest. At current rates of around 6%, the debt will double every 12 years. But remember: over the past 12 years UK house prices have risen by about 50% so there will probably still be plenty of value left in your home for your heirs. It is very important that you only deal with lenders who are members of the Equity Release Council, as they guarantee your debt will never exceed the value of your home.
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You can do what you like with the money you release. It can help you sleep by paying pay off debt, including interest-only mortgages. It can improve your home to make life easier as you get older. It can pay for that once-in-a-lifetime holiday. Or it can help your family.
Some types of home will not be accepted for equity release, and you must be at least 55 to do it. If you get pension credit or other means-tested benefits, or you already have savings, it may not be a good idea. It’s always very important to consult an independent financial adviser who specialises in equity release. But, done properly, it can transform your later life. For more information, go to equityreleasecouncil.com.