Equity Release: Unlock Some of the Cash in Your Home

A common situation that many retired Britons face is the struggle of living on a limited pension and personal savings whilst living in an equity rich property. Having cash tied up in your property instead of your pocket can be a frustrating situation but equity release plans could be the perfect solution to reversing the situation and freeing up your cash.

There are several reasons why individuals want to release equity from their property; perhaps to make improvements around the home, buy a new car, pay for a holiday or simply to make life more comfortable overall. You could even use the extra money to help family members climb onto the property ladder too. Equity release plans can be an easy way to essentially borrow money secured against the value of your home, with the debt being repaid from the sale proceeds after your death or entry into long-term care.

Equity release plan is an umbrella term for a variety of different schemes that provide you with options best suited to your own personal situation. You can generally choose from receiving a lump sum, a regular drawdown or even both. The lump sum can help you with any immediate plans you may have, whilst a regular drawdown could be just the boost you need to settle comfortably into your retirement.

A major benefit of releasing cash from your home is tax exemption. Any money released from your principle residence through an equity release plan is classified as tax free, which helps to increase the amount you receive a little bit further. It’s important to remember that if you were to invest any of the money you release, tax may be payable on any income or growth accrued.

Another important point to note is that with equity release, you can continue to live in your own home throughout the duration of the plan. However, releasing equity from your home could affect your tax position, your eligibility for means-tested benefits and ability to move or sell your property. It could also reduce - possibly to nothing - any inheritance that you decide to leave. You are also still responsible for keeping your home in good repair throughout the duration of the plan.

It is beneficial to explore other options before deciding to release equity from your home including downsizing to a smaller property or using existing savings and investments.

Indeed, many people have found equity release an effective way of releasing readily accessible capital from their home, enabling them to afford the life they want in retirement. Therefore, it may prove beneficial to investigate the options available to you and speak to a financial advisor to make sure you fully understand the features and risks of equity release.

This article has been written for information and interest purposes only. The information contained within this article is the opinion of the author only, and should not be construed as advice or used to make financial decisions. Expert financial advice should always be sought and any links contained within this article are included for information purposes only.