What does equity release mean today?

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Equity release as a concept and financial solution for homeowners has changed markedly over the years, both in terms of popularity and what it can mean to families who use it.

The main change has come from our own behaviours. Property used to be something we thought of as a nest egg, to be grown and passed on to our children or their children. If equity release was considered as an option for this approach then it was quite often used to add an extension, thus increasing the value of the property still further before it was passed on.

The above approach is increasingly rare for two reasons. Firstly, many people now see their property as part of their pension and often plan on downsizing when they reach the later years of retirement. Secondly, many people are also less concerned about maximising their property value for an inheritance, with children often encouraging parents to enjoy their retirement, rather than worry about them!

The other change that has affected what equity release means is our ability – or otherwise! – to save properly for our retirement. The government is currently in the process of rolling out a scheme known as automatic enrolment, which will see many workers added to workplace pension schemes for the first time. This is because the state pension is no longer considered adequate as the sole method to support us in our retirement and many people do not hold private pensions.

Whilst many people will benefit from automatic enrolment in the long run, people retiring now or over the next few years will have retired too soon for it to have a significant impact. Like many retirees over the last few years, they may find that they are unable to live their retirement to the standard they expected.

This is really where equity release has made a big change and a big difference to the people who decide it is the right solution for them. Instead of struggling with a lack of savings in retirement, equity release can be used to provide something known as a lifetime mortgage. This solution gives you a regular income from the equity in your home for the rest of your life, whilst allowing you to stay in the same place: perfect if you don’t want to downsize or leave the home you have lived in for a substantial period.

The change is a very progressive one meaning that, today, equity release allows freedom for people who have not managed to save up enough to enjoy their retirement. It is still a flexible solution, available for many other purposes, but for many people, the change in equity release is making a big difference to their lifestyles.

THINK CAREFULLY BEFORE SECURING OTHER DEBT AGAINST YOUR PROPERTY.
YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR OTHER DEBT SECURED ON IT.

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