Not only is the cost-of-living crisis continuing to rage in the UK, but it’s looking like it could get worse before it gets better.
Not only is inflation set to reach double figures by the autumn, for example, but the Bank of England (BoE) has also suggested that the UK’s economy is likely to weaken early and more significantly than others due to the ongoing energy crisis.
For older citizens, the concept of equity release may provide some much-needed financial relief. But what is this, and how can it help?
What is Equity Release?
When you own property, a considerable amount of capital remains tied up in mortgage agreements and the value of your home.
With an equity release, you can use a range of similar products to access this capital (usually in the form of a lucrative, lump sum payment).
You’ll also have the option of withdrawing the capital in a number of smaller payments, or combine both payment methods to create a bespoke arrangement that’s right for you.
However, there is criteria that needs to be met if you’re to qualify for an equity release mortgage. Firstly, you’ll need to own your own property, and one that isn’t gripped by negative equity or burdened with increased debt.
When appraising how equity release works, you should know that this is only available to homeowners who are 55 or older. This is a deal-breaker, and you won’t qualify for an equity release mortgage if you’re a younger property owner.
How Can Equity Release Provide Financial Relief?
Of course, there are multiple reasons why you may want to leverage equity release in instances where you qualify for this type of product.
We’ve outlined some of the most common triggers below, while asking how equity relief can provide advantageous in such instances:
- 1. Helping Kids to Get on the Property Ladder: If you have children, you may have noticed the fact that they’re struggling to get on the property ladder. In fact, house prices in the UK experienced more double-digit growth through 2021, with the average cost of a home in England and Wales peaking above £277,000 overall. So, by accessing equity release and drawing a lump sum from the value of your home, you can afford your children a cash boost and enable them to achieve fiscal security of their home.
- 2. Funding Your Child’s Education: On a similar note, you may also want to consider funding your childrens’ higher education. After all, the total value of outstanding student loans peaked at £141 billion in March 2021, with this repayable by graduates once their earnings have reached a certain level. So, the cash generated through equity release can help to fund education and afford your kids a brighter future.
- 3. Fund Home Renovations: If you don’t have kids or dependents, you may want to spend your equity release funds on yourself. You can certainly use this cash to remodel and renovate your home, potentially adding considerable value and driving a more profitable resale in instances where you intend to downsize and prepare for your imminent retirement.