Your home is likely to be your most valuable asset, and – using Equity Release – a portion of the money tied up in it can be yours to spend as you wish.
But how will you know when the time is right to put in your application and start drawing down those funds?
You will qualify to take Equity Release from the age of 55 – and this is a good age to start thinking about your future and planning ahead.
You may not need the money just yet, and may choose to leave things as they are for another few years.
However, it’s a good idea to talk to an adviser sooner rather than later – because not every property meets the criteria for Equity Release loans. And if this is something you’re hoping to use, it’s important to know where you (and your property) stand.
Once this is established, there are three main signs that the time is right to take that loan.
1: You need the funds
As a rule of thumb, it’s a good idea to have enough money in your savings to cover your day to day living costs for three to six months – along with an emergency or Reserve fund – should the unthinkable happen and you’re suddenly deprived of your usual source of income, or a huge unexpected bill comes your way. However, 41% of Brits don’t have enough savings to live for a month without income, according to a 2020 survey (by Finder.com). And 9% have no savings whatsoever.
Research by Legal & General also found that 22% of Brits have no pension pot and plan to use their home to fund their retirement. If this sounds like you, I can help you find out if your home will qualify for an Equity Release loan that will save you having to sell up in order to access your assets.
2: You want to leave a bigger chunk of your estate to your family
Complicated Inheritance Tax rules mean that your estate will be subject to different tax thresholds depending on whether you are:
a) single or married and leaving money to friends or family who are not your direct descendants,
b) single or married and leaving money to your own children or grandchildren,
or
c) widowed and leaving money to direct family.
How long ago your spouse passed away will also affect the amount that your beneficiaries can receive before having to pay tax of 40% on the remainder.
But let’s take the most generous threshold, or ‘nil rate band’ – £1,000,000 – which will apply if you’re a widow or widower whose spouse died after April 2009, and you’re now leaving your estate to direct family.
If your estate is valued at £1,500,000, the tax due could be £200,000.
If your estate is valued at £3,000,000, the tax due could be £800,000!
Taking Equity Release and gifting the money to your family will reduce the value of your estate, thus lowering the amount of Inheritance Tax your family will have to pay – and you’ll also be around to see them enjoy it!
However, remember that some Inheritance Tax will still become due if you pass away within seven years of gifting the funds you’ve drawn down from your property’s value – so do plan well ahead.
3: You simply want to! It’s your money, and you’d like to enjoy it while you can!
Another equally good reason to take Equity Release is to buy yourself a bit of fun in your later life.
Why sit back and dream about a bucket list of things you wish you’d done when you can do them for real using money that’s entirely yours? This could be your chance to take up a new hobby, or travel to places you’ve always wanted to see.
As long as you can still comfortably afford your day to day living costs, you’ve nothing to lose, and nothing to feel guilty about.
It’s your money, and your life, so enjoy it!
