Are you approaching retirement and worried about how you’ll be able to afford the luxuries of life, or even a decent living, without the comfort of a steady paycheck? Are you a homeowner aged 55 and above? Have you responded in the affirmative to any of these questions? If yes, you’ll be happy to know that you can quit worrying and start looking forward to the best years of your life.
Equity release is a form of unlocking cash from your home that allows you financial freedom while at the same time guaranteeing you have a rent-free place to live. Sounds too good to be true? It’s not. In this post John Lawson, Equity Release Expert from SovereignBoss, will tell more about how to unlock your property’s potential and start getting steady income.
Why Equity Release Is Important
As you grow older, having a steady income becomes even more critical while at the same time, working longer hours becomes less impractical. As such, many seniors find themselves caught at an impasse whereby time and money become limited. When faced with the need to sustain a comfortable lifestyle post-retirement, it becomes essential to be creative and forward-thinking as far as your financial decisions are concerned.
One of the best decisions you can make as a senior is to opt for equity release. If you have a home that’s highly rated and well-valued, you can use it to get a steady stream of income. There are different forms of equity release plans that you can use to earn that regular paycheck. The most preferred provision is the lifetime mortgage which allows you to take a loan against your home. You may receive this loan as a lump sum payment or in smaller amounts spread across time. Once you move into a retirement home or pass on, your home will be sold to repay your loan.
The other type of equity release arrangement that’s popular with homeowners is home reversion. Home reversion involves selling all or part of your home to a third party. You’ll, however, continue to live in your home for the duration of the plan’s existence which is usually until when you move into a permanent care facility or after your death.
Pros of Equity Release
The most significant advantage of equity release is the financial freedom it offers to a demographic that often deals with financial constraints. As a senior who has retired, relying entirely on pension funds and other irregular income may be frustrating and worrying. With equity release, you can finance your post-retirement lifestyle and even treat yourself to some luxuries without worrying about staying afloat financially.
Equity release enables you to take advantage of the “sale” of your home without giving up homeownership. It doesn’t get better than that. Depending on the provision that you choose, you may continue to benefit from the appreciation of your home value throughout the years.
Equity release is flexible and allows you to move into a different home should you wish. Some plans allow you to transfer the terms and conditions to your new home, as long as the new home meets the required criteria. As such, you’ll not be tied down to one property just because you’re in an equity release agreement.
Cons of Equity Release
Equity release diminishes the value of your estate since you’ll be giving up part of what you own and committing it to repay a loan in the future.
Supplementing your income using equity release may disqualify you from getting significant means-tested state benefits.
With the home reversion plan, you’ll essentially be giving up your home even if you’ll continue to live in it. The third-party will become the new homeowners after you sign on the dotted line.
If you’re seriously considering signing up for an equity release arrangement, it’s necessary to ensure that you’re acquainted adequately with these pros and cons. This way, you can make an informed decision that will guarantee you a comfortable retirement and not cause you any regrets in the future. Speaking to an equity release adviser before making a decision is also recommended.