The motivations and attitudes of homeowners arranging equity release

Why do so many people choose equity release?

Written in line with our editorial policy.

A record-breaking 93,421 homeowners unlocked some of their money with equity release in 2022 according to the Equity Release Council. It has become an increasingly popular option for people in and approaching retirement looking to boost their finances, but why the increase?

This article explores the motivations and attitudes of equity release customers. We’ll discuss the main reasons for equity release and the possible psychology of equity release customers:

• What is equity release?
• Main reasons for equity release
• Attitudes of equity release customers

What is equity release?

Equity release enables homeowners aged 55 and over to unlock a tax-free cash lump sum from the value of your home. The money you release can be spent however you wish, though you must first pay off any outstanding mortgage on your home. 

There are typically no monthly repayments to make on a lifetime mortgage, as the interest can be left to roll up over the life of your plan. If you want to reduce the amount of interest that accrues, you can choose an interest-only plan or make ad hoc payments when you can afford to.

When you pass away or move into long-term care, the money from the sale of your home will repay your loan plus interest.

Main reasons for equity release

To understand the motivation for equity release customers, we can look at the main reasons for equity release. In 2022 the equity release provider Canada Life released its own findings that give us some helpful insights. 

Clearing the mortgage

Canada Life’s customer data shows that exactly half (50%) of customers were using some or all of their money to pay off an outstanding mortgage. It seems a huge motivation for equity release customers is enjoying retirement without the financial burden of monthly mortgage payments.

Home improvements

Home improvements came second in the report, with 38% of customers citing this as a reason for taking a plan. In addition to increasing the value of your home, making improvements such as major repairs could also help you to remain in the home you love, rather than having to sell up.

Financial support

In a telling sign of today’s economic climate, one in five customers (20%) were using equity release to help cover their day-to-day living costs. Similarly, 15% of customers are unlocking their money to gift to family and friends. 

Travelling

Being able to book luxury holidays and getaways abroad (14%) continues to be a popular reason for equity release. Clearly, the motivation for some equity release customers is to travel and see the world, perhaps to make the most of their retirement.

Buy a new property

Interestingly, more than one in ten customers say they are using some or all of their money to buy a new property (12%). Whether this is to buy a second home or to help them move up the ladder to a more expensive home is unclear. However, it does suggest the motivation for equity release for this particular group is to boost their property portfolio.

Buying a car

According to the same report, one in ten customers are using their money to buy a car. With the cost of second-hand cars rising in recent years, it can be expensive to buy a newer model if your current motor has reached the end of its life. It seems that equity release is helping homeowners to maintain their independence with car ownership.

Attitudes of homeowners arranging equity release

There are many different attitudes of equity release customers. For those who decide to go ahead with a plan, what is the attitude or psychology of equity release customers?

Time to enjoy life?

Some homeowners are of the attitude that they have done enough for their children and family during their lifetime. Some have no family to leave their money to and do not want to leave all their property wealth to friends or charity. They perhaps want to enjoy spending their hard-earned money and make the most of retirement. From holidays and new cars to simply topping up our day-to-day income, there are many ways equity release can make retirement a more enjoyable experience!

Being a helping hand

Others are perhaps troubled by loved ones experiencing financial hardship. Some customers’ attitude towards equity release is that their family may as well have their inheritance now, when they need it most. A ‘living inheritance’ can be a very rewarding experience, as you will get to see your family enjoy their money. 

Of course, you should consider that a plan will reduce the value of your estate and the amount of inheritance you leave in the future. You should consider this very carefully and speak to an adviser before making a decision.

No other option suits

And there are of course those who have considered all their other financial options and have come to the conclusion that equity release is the only viable option. 

Perhaps you are unable to downsize your home? Maybe it is unaffordable to make monthly repayments on a loan to raise the money you need and you can’t borrow from family? If you have financial pressures and need a long-term solution, equity release can be a lifeline.

Speak to a specialist

Whatever your reason or motivation for equity release, we are here to help you explore your options. Our selected advisers will take the time to get to know you and your unique circumstances to help you make the right decision. 

Our selected equity release specialists are ready and waiting to help you explore your option and find the best plan for your needs.

To arrange an appointment with an adviser, talk to our friendly consultants on 0808 178 3055, or request a call back at a time that suits you. Alternatively, check your eligibility and get an initial indication of how much tax-free cash you could unlock.