Equity release presents an opportunity for older homeowners to release cash that’s otherwise tied up in their property. A new study has found that over £32.6 billion has been released from UK property over the last 20 years by some 557,219 customers.
The research conducted by equity release advisers, Key Advice, found that over £9 billion was released by more than 129,000 homeowners in the South East of England alone. Those in London and the South West have released the next highest amounts at £5.5 billion and £4 billion respectively.
At the other end of the scale, older homeowners in Northern Ireland (£226.7 million), the North East of England (£804.9 million), and Wales (£1.2 billion) have released the least.
Key Advice’s study also found that 90% of equity release customers would recommend the process to family and friends – while over two-thirds say it has substantially improved their quality of life.
So, what does equity release involve, and why do people do it?
What is equity release?
In short, the equity in a property is its market value minus any outstanding mortgage or other debts secured against it. UK Homeowners over 55 can release some of this money tax-free to use as they wish after paying these outstanding debts off.
The most popular type of equity release is a lifetime mortgage, which is a loan secured against your home. You can receive the loan as a lump sum or in instalments.
Lifetime mortgages usually come with no monthly repayments – instead, the loan is repaid when the plan comes to an end and you sell your home, move into long-term care or pass away.
The amount you can borrow through equity release is based on factors including your age and health, as well as the value and condition of your property.
What are the motivations behind equity release?
The reasons for borrowing money through equity release are varied, from wanting to enjoy a more comfortable retirement to supporting younger family members.
Perhaps you need to make home improvements or adaptations to make sure you can stay in the property you know and love. This could include installing a downstairs bathroom, fitting a stairlift or making the outdoor space easier to navigate.
Alternatively, many people use equity release simply to boost their finances, pay off debts and do more of the things they love, such as travelling. A pre-pandemic study found that a quarter of retirees go on holiday five or more times a year.
Another common motivation is gifting money to younger family members to help out at important stages of their lives, such as buying a first house or getting married.
Anyone considering equity release is legally required to seek professional advice before doing so. But with everything taken into account, it can be a transformative solution for many older homeowners.