A cash windfall can be life-changing – and so can an Equity Release loan.
It is a tax-free sum of money that can be used for almost anything you wish. Here are some of the most popular uses that I see:
- Helping family members
Many of my clients want to help their children buy their own first property, or move up the ladder, and an Equity Release loan against the family home is one way they can help their offspring raise a decent-sized deposit.
You may also want to help one of your children to launch a business, or you may wish to give them an early inheritance (potentially saving them tax on your estate when you die).
Helping children in some way is one of the most popular uses of Equity Release that I see.
- Paying off your mortgage
Whether you’ve been servicing an interest-only mortgage and now have the original loan to repay, or you want to bring an early end to the shackles of a repayment mortgage, Equity Release is an increasingly popular way to do this.
In fact, it will be a requirement of your Equity Release loan that you do repay any outstanding mortgage on your house before you start enjoying the remaining balance of the loan for other things you may want to do.
- Home improvements
Home renovations are a good use of your Equity Release loan as they are likely to increase the value of your property.
As well as being able to enjoy the improvements you have made, you will have invested your money wisely and, market values permitting, you or your family could profit when the house is eventually sold.
- Funding retirement
We’re all living longer these days and could face up to 40 years in retirement. For clients with insufficient pension plans, Equity Release is one way to make older age more comfortable. You will need to discuss your best options for using your funds with a financial adviser.
- Buying a second home
The money you borrow against your main residence can be used to buy a second home, or a holiday home. However, it will be a requirement of your loan that you live in your main home (the one you have borrowed against) for at least six months a year.
Your second or holiday home can be used as a new source of income for you – but you will need to take professional advice.
Plan ahead carefully if this is how you wish to use your loan.
There will be costs such as stamp duty (which is higher on a second home), solicitors’ fees, and service costs (gas, electricity, water, and council tax) to take into account.
The biggest advantage of using your money to buy a second property is that it can be an excellent investment as the value of both properties could grow.
- Funding long-term care
Equity Release is a great way to remain living in your home for longer, even if you reach a stage when you need care. It can be used to fund the cost of a carer coming into your home, as well as refurbishments to make your home more accessible.
However, if you later move into full-time residential care, your lender will require the loan to be repaid and this is usually done by selling your home. If your family prefer, and have the means to do so, they may choose to settle the loan by other means, such as raising a Buy-To-Let mortgage in order to keep it.
If you are a couple and have a joint Equity Release loan, the plan will remain in place until both of you have moved into long-term care, or died.
In this case, rest assured: if only one of you needs long-term care, your partner can continue to live at home.
- The good life
The bottom line is that you can use your Equity Release funds for almost anything you like – be that a new car, a dream holiday, or a fantastic celebration. But do use it wisely. However tempting it may be to splurge now, try not to do anything that will leave you with regrets in the future or, of course, short of funds to maintain a healthy and happy life.
