Uses for Equity Release Schemes

Equity release schemes are growing in popularity for a number of reasons and that’s no surprise given how useful they can be to the average homeowner during their retirement. The possibilities of how equity release schemes can be used have changed over the last 15 years. From its origins, equity release plans were mainly used for lifestyle reasons predominantly. However, today we see more ‘needs’ based equity release solutions such as debt & interest only mortgage repayment through to helping the next generation.

There are a number of different ways to use equity release to your advantage, such as the following: –

1. Home Improvements. The cash drawdown from equity release schemes can be spent on reinvesting in order to improve your existing property. This could mean finally spending the money on those needed improvements that you always put off because they were simply too costly. Making those improvements could also mean that you increase the value of your home when it is finally sold. This could mean that you are able to pay off your debt to your equity release lender and still have something left over for your beneficiaries!

2. New Car. You can finally buy that new care that you have needed or just wanted for so long! With the cash you receive from your equity release, you can buy a car that you never would have dreamed of purchasing back when you were on a fixed budget. You don’t have to buy a practical car; you can buy your dream car! Many a customer has sourced new hybrid or low emission vehicles which themselves come with much lower fuel costs, but also some do come with zero car tax! So that where equity release can even save you money over future years!

3. Debt Consolidation. If you have any outstanding debts, now is the time to pay them off. With your equity release cash, you can avoid getting charged all of that interest on your outstanding debts. Many homeowners use their equity release cash to pay down all of their existing bills. There is no better way to spend retirement than to be debt-free and an equity release scheme can help make that happen. Many credit cards come with APR’s in excess of 20%. Therefore unless you can ‘card tart’ by obtaining a 0% credit card, an equity release scheme will certainly have a lower interest rate by switching. Also those will interest only mortgages that will run into retirement can used an equity release to clear this debt and manage it then through their retirement!

4. Move Home. Equity release schemes can always be used to upsize your living arrangement. This means that you can use the cash to live in your dream home! Many homeowners choose equity release to improve their standard of living and to you, that may mean upsizing! This works by using an equity release calculator to assess how much equity could be taken on a higher valued property. This extra equity could bridge the difference between the sale price of the existing lower valued property, & the purchase price of the more expensive. This is how equity release can be used to upsize, particularly when moving into a bungalow which usually comes at a premium!

5. Gift to Your Children. It is possible that you may not be able to leave behind quite the inheritance you thought you would once you take out your equity release scheme. Once your house is sold and the loan is paid back, there might not be that much left but that doesn’t mean that you can’t leave money behind for your children. Save some of that money from your equity release and you can leave it for your children or other beneficiaries when they need it more which maybe when they are buying their first property & are short of funds for a deposit. Maybe the children are looking to set up in business & a windfall now would set them up for life? Afterall, is an inheritance any use to someone when they are aged 60-70!

6. Inheritance Tax. Equity release can often be used as a way to reduce Inheritance tax and therefore mitigate your inheritance tax liability. There are a few factors that will determine the effectiveness of using equity release to save Inheritance Tax but many homeowners find equity release to be a successful tool to help lower Inheritance Tax. Consider gifting money away now to your preferred beneficiaries & survive the next 7 years & the gift is considered then to be classed outside of the estate when calculating for inheritance tax purposes. A 40% charge for any capital over the IHT threshold, can amount to a considerable penalty for any beneficiaries!

7. Long Term Care. Equity release can serve to help you self-finance long term care you may need. You can receive the cash built up in your home and then use it to pay for the services you need. Equity release funds could therefore be utilised to meet the cost of care which would enable one to receive this in the home you have lived in for so long!

8. Income. With equity release cash, you can subsidize your own lifestyle however you see fit and if you choose to receive your cash payments as an income. That means using the flexibility of drawdown lifetime mortgage schemes in the same way you would when you were working but this time you don’t have to go to work!

9. Holidays. There may be no better way to spend your retirement than on holiday. With the money you receive from your equity release scheme, you can take every trip you have ever dreamed of taking and you don’t have to feel guilty about spending too much cash. Equity release can be used on all of those world class holidays & cruises you never thought you’d be able to take!

10. General Expenditures. Perhaps the best way to spend your equity release is to do so spontaneously. You don’t have to decide today what you will do with your money. It is simply there for your enjoyment and can be used on any expenditure you want. It serves to provide just the right amount of security during your retirement years. It could be there to meet any shortfall in monthly budget, dinner with friends, even those bingo nights that have been put on hold due to a shortage of income.

There are many further possibilities for all types of equity release schemes which people have found. To discuss how equity release could benefit you, call the team on 0800 028 2098 today!

Want to know whether you can raise enough money from your property?

Use our free equity release calculator to understand your maximum release!