Is your home retirement ready?

Is your home retirement ready?

By Melanie Wright

Two-thirds of people who released equity from their homes in the three months to October used the money to get their homes ‘retirement ready’.

Latest figures from equity release specialists Key Retirement show that 64% of those who unlocked property wealth in the third quarter of this year spent it on home and garden improvements. The average retired homeowner released £71,500 of property wealth from a home worth an average of £325,000.

However, there are plenty of other reasons homeowners choose to release equity from their properties. More than one in five (22%) customers used wealth unlocked from their homes to pay off outstanding mortgages, while 30% used the cash to clear debts. A further 36% used some of funds released to go on holiday, whilst 12% released money to help with regular bills. Over a quarter  (26%) said they used some of the money to help family and friends.

According to Key, mortgage repayment has grown as a usage for equity release more than any other, up from 17% in 2010. Many homeowners reaching the end of their interest-only mortgage are faced with a lump-sum capital repayment that they simply don’t have, either because investments taken out to cover these payments have under-performed, or because they failed to set up a savings plan at all.

The majority of those who used equity release schemes to unlock property wealth in the three months to October used drawdown plans. As the name suggests, this type of plan allows you to draw down funds as and when you need them, helping to keep overall interest charges to a minimum. Interest on funds released usually rolls up over time and is normally repaid, along with the amount borrowed, either when you pass away or go into long-term care.

Equity release is becoming an increasingly popular way for older homeowners to boost their retirement incomes, with many having benefited hugely from rising property prices in recent years.

Key’s calculations show that since 2010 retired homeowners have seen average their property wealth grow by an average or 41% or £321 billion, which is worth around £68,500 on average for homeowner aged 65 or over. Key claims that owning a home has been worth around £9,800 a year for over-65s over the past seven years.

Dean Mirfin, chief product officer at Key Retirement said: “Prices may not continue to grow as fast but pensioners who have paid off mortgages can still rely on tax-free returns no matter what happens in the short and medium term.

“The average homeowner is releasing through equity release the equivalent of the gains made since 2010 and property wealth is having a dramatic effect on the standards of retirement living for many thousands across the UK.”

Equity release can affect your entitlement to some state benefits and will reduce the value of your estate, so it’s vital to seek professional financial advice if you’re considering this type of scheme.

To request your FREE guide to equity release, written by Paul Lewis, or to arrange a FREE no-obligation consultation, call Key Retirement on 0808 208 5406 (lines are open Monday–Thursday 9am–7pm, Friday 9am– 5.30pm and Saturday 9am – 1pm).

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