What Are the Top Ten Uses of Equity Release in 2024?

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.
  • Last Updated: 30 Jan 2024
  • Fact Checked
  • Our team recently fact checked this article for accuracy. However, things do change, so please do your own research.

Contributors:

Francis Hui

Key Takeaways:

  • Common uses for equity release in the UK include supplementing retirement income, paying off debts, funding home improvements, or supporting grandchildren's education.
  • By taking out an equity release scheme, you can supplement your retirement income, providing a financial boost for your later years.
  • It can be utilised to pay off debts, helping to alleviate financial stress and potentially reduce monthly outgoings.
  • Home improvements can indeed be funded through equity release, a strategic move that can also potentially increase your property's value.
  • It comes with both risks and benefits: while it provides a lump sum of tax-free cash, it can reduce your estate's value, affect your tax position and eligibility for means-tested benefits.

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?

    What Is Equity Release 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.

    What Are the Most Common Uses for Equity Release 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.

    Unpacking Equity Release For You

    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.

    The Most Common Equity Release Uses

    The most common uses for equity release funds:

    Use #1. 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.

    Use #2. Equity Release 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

    Use #3. Consolidating Your Debt

    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.

    Use #4. Equity Release to 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.

    Use #5. 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.

    Use #6. 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.

    Use #7. 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.

    Use #8. 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.

    Use #9. 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.

    Use #10. Equity Release 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.

    Common Questions

    What Are the Most Common Uses for Equity Release in the UK?

    How Can I Use Equity Release to Supplement My Retirement Income?

    Can Equity Release Be Used to Pay Off Debts?

    Is It Possible to Use Equity Release to Fund Home Improvements?

    What Are the Risks and Benefits of Using Equity Release?

    What Can Equity Be Used For?

    Can I Use Equity Release to Buy A New House?

    Can My Heirs Use The Equity I Release?

    Do I Have To Use My Equity On Property?

    In Conclusion

    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.

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