If you are considering retirement and have a large amount of equity in your home, you may want to consider taking out an equity release from your property. Equity release is a term used to describe the process of releasing some or all your property’s equity in order to access funds for retirement, health care costs, or other purposes. The equity release market has grown significantly over the last few years. 

In this article John Lawson from SovereignBoss is providing a guidance on how you can benefit from taking out an equity release plan and helping you decide if it is something worth considering for your future.

Advantages of Equity Release

With cash flows being one of the biggest concerns for retirees, equity release may be a great option. Equity release is a form of financing that allows homeowners to access the value in their property without having to sell it. It can be an excellent choice for those who are looking for a way out of a difficult financial situation or want more freedom from their home.

The equity release process involves turning your house into cash so you can use the funds how you please. If you’re interested in learning more, read on as we provide the reasons why equity release is your best choice.

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Photo by Glenn Carstens-Peters on Uns

#01. Freedom to Spend

Freedom isn’t free, but it doesn’t have to be expensive either. In fact, equity release can help you keep the home of your dreams and retire in style without having drain on your finances for years after retirement age.

When you take on an equity release plan, there are no restrictions on how you use your money. You have the complete control over how to spend your money. You can take time off and relax, give money back to your family for their needs or emergencies or buy something close-to-home like new clothes in your favourite boutique. With a home equity release plan, the possibilities are endless!

#02. Tax-Free

Equity release can be an excellent way to ensure that you are able to retire stress-free. The money released based on property’s worth is not taxed, which means this free income could be a perfect choice for those who know they will need some funds after retirement.

In some ways, it could be an alternate form of retirement income if you don’t have any other substantial assets or savings lined up for the end-of-life stage and want something that will provide monthly cash flow over time.

#03. Low Interest 

Most people don’t realize that their home equity can be used as a retirement account. Equity release plans are a way to extract equity from your home without having it negatively impact the value of the property. These loans often have lower interest rates and significantly reduced operating costs, making them an ideal solution for homeowners that need cash now or in retirement but don’t want their house payment going up over time.

#04. No Need to Move Out

Moving out of your home is stressful, but there are ways to alleviate that stress. For many people, the idea of moving out and downsizing is not a welcome one. You don’t have to move out of your house just because you need money. An equity release might be the solution for getting extra cash and stay in your home, too.

#05. Monthly Payment Is Not Required

Unlike other types of loans, users in equity release do not have to worry about keeping track of monthly payments or struggle to make them. You might choose to make monthly payments towards your debt if you want the eventual lump sum that needs be returned will feel less burdensome long term and help better manage life expenses moving forward.

#06. Secured Providers

The majority of providers are members of the Equity Release Council (ERC) and must follow strict rules and regulations. This gives you peace of mind and trust in your lender. Offering a no-negative-equity guarantee is one of the most significant conditions for being an ERC member. This means that if your house falls below its original value, you will not be required to make up any difference on top of what you originally took out in loans.

#07. No Monthly Increase

In most cases, people are not required to repay the money freed or even the interest on the loan until you go for a long-term care or passed away. In other words, there’s no cost for many years except from set-up and/or advisory fees which are paid up front. Compound interest refers to this type of investment where an investor earns more than what was initially invested as long as money has been added at some point in time before the account balance reaches zero.

#08. Inheritance Tax Avoidance

Equity release can be a good way to pass on money and increase the amount your loved ones get. To do this, individuals have the option of making monetary presents throughout their lifetime to avoid paying inheritance tax. This allows them make cash gifts without losing any personal savings or investments from being taxed by the government. Not only does it allow you more freedom with what gift you want but also makes sure there is something left for those who will inherit after retirement.

It’s important to weigh all your options before making a decision. Equity release may be a good choice because it can help alleviate some of the financial burden of being in retirement home care and give you more control over how much money goes into your care each month.

It’s also the best option for seniors who are looking to retire in style. It’s a simple and affordable way of freeing up cash, releasing equity from your home or other asset, without having to sell it. This can be used as an alternative method if you don’t want to go down the route of getting another loan on top of what you already owe and will need at this stage in life.