Why are homeowners taking equity release?

Discover the main reasons for equity release: what are homeowners doing with their money?

Recent figures from the Equity Release Council show the equity release market has grown to be six times bigger than in 2011. But what are homeowners doing with the cash they release from their property wealth?

The average UK home has around £207,470 of equity sitting in it according to the Equity Release Council Spring Market Report 2022. It means equity release customers in the UK were able to access a staggering £4.80bn of property wealth in 2021. It’s a mind-blowing amount of money, so what are our over-55s spending their tax-free money on? 

In this article we will be looking at some of the most popular reasons why people take equity release, including:

• Equity release to pay off the mortgage and other debt
• Equity release to pay off interest-only mortgages
• Equity release to pay for home improvements
• Equity release to help family
• Equity release to pay for holidays
• Equity release to buy a car
• Equity release to pay for care
• Equity release to fund cosmetic and dental work
• Equity release for more retirement income

If you’d like to explore your options for any of these or other reasons for equity release, please check your eligibility and get an indication of how much money you could release. Alternatively, talk to our friendly consultants on 0808 178 3055 or request a call back at a time that suits you.

Equity release to pay off the mortgage and other debt

Adjusting to a smaller income in later life can be very difficult, especially for those of us who still have a mortgage or other debts to clear. It’s therefore no surprise that many people use equity release to pay off the mortgage, loans or credit cards.

By using the tax-free cash from their home’s value, homeowners may avoid having to downsize or work longer than planned. This is because with equity release to pay off your mortgage, you won’t have to make any monthly payments. Instead, with a lifetime mortgage the loan plus interest are typically repaid by selling the property when you pass away or move into residential long-term care.

Equity release to pay off interest-only mortgages

Being able to arrange equity release to pay off interest-only mortgages in particular can be nothing short of life changing for some. Homeowners who took out their interest-only mortgages in the 1990s are likely to have seen significant price increases on their homes since. It means many people could have homes with enough equity to pay off the capital on their interest-only mortgages, if other options aren’t available.

Equity release to pay for home improvements

Many customers say they intend to spend all or some of their money from equity release for home improvements. Major home improvements such as adding a conservatory or building an extension can cost many thousands of pounds, but may add significant value and completely transform a home.

Making garden improvements is another common reason for equity release. Garden landscaping can be costly, but in later life it can make a real difference to quality of life. For example, for those of us with gardens on varying levels or difficult terrain to walk over, the results can be more attractive, practical and far safer.

If you are thinking about using equity release for home improvements, it’s worth thinking about what your needs are for both now and in the future. By making your home more accessible – a downstairs wet room for example – you could help you ensure you remain there for many years to come.

Equity release to help family

It can be difficult seeing your loved ones struggle financially, but more so when you’re unable to do very much about it. Gifting money to loved ones is one of the main reasons for equity release, with homeowners choosing to gift their family with an inheritance now, when they need it most. 

Do you have grown up children needing help getting on the property ladder? Perhaps you have a grandchild needing financial support through university? It’s a wonderful feeling to be able to help the people you love the most. With equity release you can provide a living inheritance and enjoy seeing them benefit from your gift.

Equity release to pay for holidays 

Another reason why people take equity release is to enjoy wonderful holidays. You may decide to take regular income through a drawdown lifetime mortgage to fund annual holidays. Or perhaps a lump sum lifetime mortgage will let you take that once-in-a-lifetime holiday you’ve always wanted – perhaps a world cruise on a luxury liner, or flying to exotic long-haul destinations like the Caribbean, Australia or the Maldives. 

After working so hard over your career to buy your home, now could be the perfect time to get out there and rediscover you. Perhaps you’ve got some major bucket list items to tick off or have loved ones abroad who you’d love to visit? Releasing tax-free cash from your home could make that happen.

Equity release to buy a new car 

Replacing your old car for a newer one isn’t as cheap as it used to be, with second-hand car values going through the roof. According to Thisismoney.co.uk, used car prices rose by 30% on average in 2021, with some second hand models selling for more than when they were new. 

Are you looking for an upgrade to your car? Maybe now is the time to treat yourself to that nippy two-seater you couldn’t justify when you had a young family! Or perhaps you want something more economical to help drive down travelling costs. Buying a new car is often cited as one of the main reasons for equity release, giving homeowners a greater range of motoring options.

Equity release to pay for care 

Equity release to pay for care also makes an appearance on our list, with some people choosing to unlock money from their home in order to receive care in it. 

Sadly some people in later life are faced with selling their home to pay for domiciliary care (care at home). The money raised from an equity release plan can help prevent this heart-breaking situation from happening. 

With a plan in place, you could access the funds needed to pay for the care you or your partner need. You could even have home modifications made to help make your day-to-day life easier, such as a stair lift or a downstairs wet room.

Equity release to fund cosmetic and dental work

Some people choose to spend some of their equity release money on cosmetic and dental procedures, such as dental implants, which can cost over £2,000 per tooth. 

With cosmetic procedures such as these being so expensive, some people have no choice but to endure years with issues they long to have corrected. Thanks to equity release, homeowners can finally enjoy a more confident outlook.

Equity release for more retirement income

Many people choose equity release simply to enjoy a more comfortable lifestyle with a bigger disposable income each month. Not everyone has access to a substantial pension, savings or investments. Equity release can potentially bridge the gap between your current income and the lifestyle you’d like to enjoy in retirement – or simply top up your income to relieve money worries.

Homeowners are making the most of their growing equity

It’s clear that equity release is not just a last resort for those experiencing financial issues. Instead, the main reasons for equity release feature holidays, new cars and home improvements. Thousands of homeowners every year are able to fund luxury or life-changing purchases in later life thanks to the equity they’ve built up in their homes.

According to the Nationwide House Price Index, during the first quarter of 2022 the average UK home was worth £260,771. In 2002 that same home was worth just £96,356 – that’s an increase of £164,415 over 20 years. 

In the past, some later life homeowners might have had no other choice but to sell the home they love to access the money needed for their retirement. Today’s homeowners have the luxury of keeping their family home with their happy memories around them, and all the money they need to live comfortably.

Speak to an equity release adviser

With so much choice available today, it could be a daunting task to try and navigate through everything alone. Fortunately you don’t have to, as Equity Release Wise are committed to helping our customers find the very best deals possible from the UK’s leading equity release providers. 

Furthermore, our carefully selected advisers will provide you with all the information you need to make a decision. They can also arrange everything for you if you choose to proceed, all from the comfort of your home.  Remember, equity release will reduce the value of your estate and the amount of the inheritance you leave, so speaking to a specialist is essential to make an informed decision.

Speak to a member of the Equity Release Wise team today to get all the FREE initial guidance and competitive quotations you need*. Call free phone 0808 178 3055 or request a call back at a time that suits you.