When they stop working in their sixties or seventies, many homeowners find that their income has dropped substantially, making it difficult to retire in comfort. Homeowners are particularly frustrated when they discover they are asset rich but cash poor, with the majority of their wealth tied up in their home.
Many individuals choose to unlock this wealth through equity release. However, an equity release should not be entered into lightly or without seeking professional advice first. When you contact financial advisors, they will help you reach the right decision regarding your finances, because they have your best interests in mind.
Several people choose to free their housing wealth by downsizing to a more cost-effective, smaller property, but many retired people want to stay in their family home. They also do not want to face the upheaval and stress of a move, because far too many memories are attached to their home. Equity release allows homeowners to stay in their home, while simultaneously unlocking some of the housing wealth.
Unlike a traditional mortgage, an equity release does not require monthly payments. Instead, the interest rolls up and when the plan finishes, due to your partner’s death or his/her transition into long-term care, the interest and the amount of your original loan is paid back to the provider. Remember, taking this financial avenue decreases the value of your estate, affecting any inheritance you may want to leave to your loved ones. For this reason, contact companies such as Responsible Equity Release to learn more about the process and the best possible course of action for your situation.
Repay a Mortgage
Many retired homeowners use equity release as a way to clear debts or pay outstanding mortgages. In most cases, the payments are for interest-only mortgages. Furthermore, the homeowners probably did not save enough money to repay the capital or did not follow their savings plan as well as anticipated. The right professionals will help homeowners fund their financial burdens and have greater freedom while they enjoy their retirement.
A few homeowners choose equity release to receive a large lump sum to help cover the cost of home improvement. Although this is not ideal for small alterations, such as a new coat of paint for the home, the extra money can help with larger choices, such as a new kitchen, bathroom, or home extension.
According to recent research performed by experts, one in five retired homeowners release their equity as a means to help family members or make home improvements. More than two-fifths of individuals who try this option are gifted with twenty-thousand pounds, an amount that many people can benefit from at retirement age.
Some homeowners choose equity release as a way to enjoy more monthly income by spreading the money over a specific amount of time. For example, drawdown plans enable homeowners to draw money down in stages when necessary. Only the funds released experience any interest, keeping costs low and affordable. No matter what expenses you cover with the money, you will profit from this decision if you stay informed and let the right companies help you through the process.