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While many may consider equity release as a loan that can give you something extra – an extra special holiday, extra spending money for retirement or extra funds for home improvement – new data reveals that people are increasingly using it to pay off their debts instead.
Specifically, the figures from Retirement Advantage show that 35% of their customers used equity release to clear an existing mortgage and/or consolidate unsecured debts in the third quarter of 2016. And this figure isn't likely to go down.
"Carrying residual mortgage debt into retirement is on the rise," said Alice Watson, head of Marketing at Retirement Advantage Equity Release. Not only are people buying houses later in life, with house prices at historic highs this also means more mortgage debt that will take longer to pay off, not to mention the added burden of student loans which future generations of retirees will have to deal with.
"What's encouraging though is that our customers are taking a holistic view of all their assets, and using property alongside pensions and other savings," Alice continued, and we agree. While it's important to take part in your workplace pension and make sure you save as much as you can, don't forget about the value of property.
A house can be much more than a cherished family home and an inheritance for your (grand)children, if you're smart about it and seek advice. Indeed, 25% of customers were still found to use equity release for home and garden improvements, while 5% even used it to buy a new property, which can be a great investment for the future.
However, the fact that people are finding it harder and harder to pay off their mortgage could cause problems down the line. That's why, especially with mortgage rates on the rise, it's important to make sure you have a competitive mortgage deal now, so you can become mortgage-free earlier and easier.
"The good news is that with careful planning and financial advice, the options available can be assessed at an early stage," concluded Alice. "This will give people the tools to proactively manage debts while also enjoying the retirement they want."
If you're all sorted to enjoy your retirement debt-free, but would like a boost to your retirement income or for the holiday of a lifetime, consider talking to an equity release adviser.
If you're racing to retirement burdened by debt, consider talking to a debt charity instead, or if that feels like too big a step, we've got a guide that talks about some smaller steps you could take to help you get debt-free.
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