What Are the Top 10 Equity Release Uses in 2024?

Equity release funds can be utilised for a variety of purposes, including home improvements, supplementing retirement income, or providing financial help to family members. The flexibility in usage allows homeowners to tailor the funds to their specific needs.
  • Last Updated: 17 May 2024
  • Fact Checked Fact Checked
  • Our team recently fact checked this article for accuracy. However, things do change, so please do your own research.

Contributors:

Francis Hui
Do You Want to Know More About the Uses of Equity Release? Discover the Top 10 Equity Release Uses and How to Use Equity Release to Consolidate Debt. Keep Reading to Find Out More.
Every Investor Promise
Every Investor Promise
At Every Investor, our aim is to assist you in making informed financial choices. We are committed to maintaining rigorous editorial standards, yet it is important to note that our content may include references to our partner’s products. For full transparency, here is an overview of how we earn money.
Key Takeaways
  • Equity release is widely used in the UK to boost retirement income, clear debts, enhance homes, and support family education, allowing you to unlock tax-free cash to enhance your later years, and ease the strain of limited retirement funds.
  • Use equity release to settle debts, potentially lowering monthly expenses and reducing financial stress.
  • Invest in home improvements to not only improve your living standards but possibly increase your home’s market value.

In This Article, You Will Discover:

    Thinking of unlocking capital but are unsure of equity release uses?

    The good news is there are several ways to use the funds that you release from your home.

    How about taking an extended vacation or finally making those much-desired home improvements?

    Who Offers the Lowest Rates in 2024?

    Discover the Lowest Rates & Save

    Request a FREE call back & discover:

    • Who offers the LOWEST rates available on the market.
    • Who offers the HIGHEST release amount.
    • If you qualify for equity release.
    Top Uses for Equity Release

    What Does Equity Release Mean and How Does It Work in the UK?

    Equity release allows UK homeowners over 55 to access their property’s value as cash, either as a lump sum or in instalments.

    What Does Equity Release Mean in the UK?

    UK equity release offers homeowners over 55 a way to unlock the financial value of their homes without selling.

    It allows you to convert part of your property’s equity into cash, enhancing your financial flexibility in retirement.

    It encompasses lifetime mortgages and home reversion plans.

    These options provide distinct approaches to managing your home’s value, giving you the ability to access funds while maintaining a connection to your property in your later years.

    Before committing to any financial arrangement, it is crucial to thoroughly research and understand the terms of the chosen equity release scheme.

    What Does Releasing Equity From Your Home Mean?

    Equity refers to the portion of your home loan that you have already paid off.

    It is the difference between your home’s value and how much you still owe.

    Equity grows as you pay your home loan off and as the value of your home increases.

    When you release equity, you take out a large sum of cash based on this value.

    Most people use equity release as a financial aid in retirement, as it gives them access to equity release direct as a lump sum or a cash facility.

    Equity release can be considered if you are looking to cover large expenses or supplement your retirement income.

    However:

    As with every good thing, there are drawbacks and risks involved.

    Economic downturns can decrease your home’s value, coupled with the impact of compound interest1.

    This could lead to you paying significantly more at the end of the agreement period.

    Downsizing is a strategy some individuals choose to access equity by selling their current home and purchasing a smaller, less expensive property.

    Why Do People Choose Equity Release and What Are Its Uses?

    People opt for equity release to fund retirements, home improvements, or other significant expenses, leveraging their home equity without selling.

    Why Do People Use Equity Release?

    The most common uses for equity release funds:

    #1. How Can Equity Release be Used for Home Improvements?

    One of the most popular reasons that people release equity is to fund home improvements.

    You may want to improve your quality of living or increase the value of your home for resale. Either way, releasing equity is a viable option. 

    Although:

    Before opting for equity release, be sure to do your research and fully understand the pros and cons of doing so.

    #2. Can Equity Release be Used to Buy a Second Home?

    Equity release to buy a second home is possible through a lifetime mortgage or home reversion scheme.

    You could purchase your dream holiday home or a property for your children.

    Remember:

    You may need to pay stamp duty on your second property.²

    #3. How Does Equity Release Work for Debt Consolidation?

    One way of overcoming financial stress in retirement is by releasing home equity to settle all your other debts.

    By using an equity release plan, you will have no monthly instalments, and you could save on the interest rates for each of your debts.

    You may be asking yourself:

    Consolidating your debt can be a risky option if you do not plan your finances correctly.

    It is important to obtain financial advice to avoid unnecessary spending and creating new debt that you can not pay off at a later stage.

    #4. Can Equity Release Pay Off Your Mortgage?

    You can use equity release to pay off a mortgage.

    In fact:

    Not only is this a common equity release use, but you must also repay your mortgage as a part of the equity release journey.

    #5. Can Equity Release Provide Early Inheritance for Loved Ones?

    Leaving an early inheritance for loved ones and getting to see them enjoy it in your lifetime is heartwarming.

    This can be as a monetary gift or through paying for some of life’s most important things on their behalf.

    It is important to consider the tax implications³ at all times.

    #6. How Can Equity Release Support Your Living Expenses?

    It is widely suggested that you should have an emergency fund with at least three to six months of living expenses saved

    Unfortunately:

    Life happens, and some people can not save that much in their lifetime.

    You can use the funds you unlock to make sure that you have enough to obtain by in your senior years.

    #7. Can Equity Release Fund a Lifestyle Upgrade?

    The word retirement makes one think of relaxed days living in a house on the beach, playing golf every day, and taking holiday cruises for quick getaways.

    This life of luxury is, unfortunately, far from the truth for many retirees.

    You may own property, but you will not always have cash on hand to live the luxurious life you desire in retirement.

    What does this mean for you?

    Equity release to boost retirement income is a way for retirees, especially those who have no debt or large financial commitments, to tap into the cash from their equity release plan to live their senior years as they wish.

    #8. How Can Equity Release Help Your Close Family?

    Helping your close family can benefit the younger generation with a great start.

    Unfortunately, parents may not always have the means to immediately help their children.

    Some opt for equity release to assist their children with buying their first property.

    #9. Can Equity Release Fund Much-Desired Purchases?

    The reality is that during your lifetime, you may not always have the financial means to buy the things you want.

    This is mostly because of the various demands that arise, leading to certain desires being overlooked.

    Consequently:

    Equity release frees up money for you to use as you see best and to achieve your financial goals.

    #10. How Can Equity Release Pay for In-Home Care?

    You can use equity release to pay for care if you prefer to stay at home during your senior years.

    With age comes the need for better care, which means a new expense in the form of care costs.

    You will not need to rely on family or friends to take care of you. You will have the dignity and comfort to live your life as you wish, with the support you need.

    What Can You Use Equity Release For in the UK?

    Equity release in the UK is primarily used by homeowners aged 55 and over to access a tax-free lump sum, regular income or both from the value tied up in their property.

    The most common reasons include supplementing retirement income, paying off existing debts, or making necessary home improvements.

    It provides an effective way for retirees to increase their income without having to move or downsize.

    Another popular use of equity release is to help family members, often by contributing to a home deposit or supporting them through education.

    Additionally, some people use it to fund their care needs in later life or cover the cost of private medical treatments.

    Equity release can also be used for once-in-a-lifetime events, such as a dream holiday, a new car, or a luxurious cruise.

    It’s a practical way of using the wealth tied up in your home to enhance your lifestyle or support your family’s needs.

    How Can Equity Release Assist With Health Care and Long-Term Care Costs?

    Equity release can provide financial support for healthcare and long-term care, offering a means to cover costs without depleting savings.

    How Can Equity Release Help Cover Medical or Health Care Costs?

    Equity release offers homeowners aged 55 and over a financial strategy to manage medical and health care costs without selling their property.

    By unlocking the value tied up in their homes, individuals can access a lump sum or regular payments that can be directed towards medical bills, ongoing treatments, or adaptations to their home required due to health issues.

    This approach allows for financial flexibility and security, ensuring access to necessary health care services while retaining homeownership.

    Can Equity Release Fund Long-Term Care Needs for You or Loved Ones?

    Equity release provides a viable solution for funding long-term care for individuals or their loved ones.

    As the need for care arises, the equity locked in a property can be converted into a cash sum, facilitating the payment for residential care homes or in-home care services.

    This financial tool ensures that the quality of care is not compromised due to lack of funds, offering peace of mind that care needs will be met without the immediate need to sell the family home.

    Can Equity Release Be a Solution for Educational and Debt Financial Needs?

    Equity release can fund educational pursuits and consolidate debts, presenting a versatile financial tool for managing personal and family finances.

    Is It Possible to Use Equity Release to Pay Off High-Interest, Unsecured Debts?

    Utilizing equity release to settle high-interest, unsecured debts is an increasingly popular strategy among older homeowners.

    This method involves accessing the equity built up in one’s home to clear debts such as credit cards or personal loans, which typically come with higher interest rates.

    By consolidating these debts into a single, more manageable loan secured against their home, individuals can alleviate financial stress and potentially improve their credit score, while also possibly reducing their monthly outgoings.

    How Can Equity Release Support Educational Expenses for Family Members?

    Equity release can play a crucial role in supporting the educational aspirations of family members.

    By tapping into the equity of their home, homeowners can generate funds to pay for tuition fees, accommodation, books, and other educational expenses.

    This financial strategy not only aids in covering the costs associated with higher education or specialized training but also provides an opportunity to invest in the future success of their loved ones without disrupting the family’s financial stability.

    What Are the Tax Implications of Taking Out an Equity Release?

    The tax implications of equity release are an important consideration for homeowners. Generally, the money received from equity release is tax-free, as it is considered a loan rather than income.

    However, how the funds are used can affect tax liabilities.

    For instance, investing the proceeds could generate taxable income or capital gains. It’s also crucial to consider inheritance tax implications, as reducing the value of an estate through equity release could impact the tax payable on the estate.

    Homeowners are advised to consult with a financial advisor to understand the specific tax implications for their situation.

    Common Questions

    How Can Equity Release be Utilized in the UK?

    How Does Equity Release Supplement Retirement Income?

    How Can Equity Release Help Pay Off Debts?

    How Can You Fund Home Improvements Through Equity Release?

    What Are the Risks and Benefits of Equity Release?

    What Are the Various Uses for Equity Release?

    How Can Equity Release Buy You A New Home?

    Can Heirs Benefit from Equity Released by You?

    Must Equity Release Be Used On Property Alone?

    Final Thoughts

    There are various ways to use the equity that you release. However, it is always best to obtain personalised advice from a financial advisor on what your options are before committing.

    Whether you choose to pay off existing debts or make home improvements, equity release may be the solution for you.

    The expert advice you receive will help you determine if it is feasible for you to unlock funds for whatever equity release uses you have in mind.

    Related Articles
    Scroll to Top