The average homeowner aged 55 or over has accumulated £289,000 in property value with an average of only £8,306 left to pay on their mortgage, research from SunLife has found. This means that these people potentially have more than £280,000 in housing value to take advantage of in later life.
After spending an average of 24 years living in the same home, many will have seen their property's value triple. Additionally, most will have paid off their mortgage when they were just 54, so they can step into retirement without having to worry about mortgage payments.
Despite this, SunLife found that on average people required £184,000 in extra cash to feel truly comfortable. Luckily, this is less than the equity they may be able to release from their home. It's not surprising then to find that "Equity release is becoming an ever more popular way for people to fund the retirement they want," according to SunLife's CEO Dean Lamble.
Any homeowner who's over 55 years old may want to consider equity release as a means of paying off what's left of their mortgage, making necessary home improvements or simply to complement pension income. Especially those who are heading towards a drop in income after retirement should not discount the value that can be gained from their home – without having to move.
Figures from Royal London show that there's quite a regional disparity between pension incomes, with the highest average income unsurprisingly found in the City of London, at £37,900 per year according to figures from 2015-2016. This is compared to the lowest income, which was recorded in Stoke, West Midlands, at £12,300.
Helen Morrissey, personal finance specialist at Royal London, commented that "While all of the top 10 local authorities are in London and the South East, three of the lowest income authorities are also in London and the South East [and] the other areas with the lowest pension incomes are scattered throughout the UK."
Indeed, pension incomes seem to be highly variable, as Helen points out that "in some cases very prosperous pensioners are living only a few miles down the road from those who are struggling". With such a large disparity in pension incomes, it's no wonder that more people are turning towards equity release.
If you're heading towards a pension that won't pay quite what you're after, and your mortgage is almost or wholly paid off, there's no reason not to consider equity release as an option. Just remember to talk to an expert as well as your family, as releasing equity will have an impact on any inheritance you may want to leave behind.
"Not everyone is eligible or suitable for equity release," concludes Dean, "but for those who are and who find they haven't got the funds they hoped for to afford a new kitchen, home extension, special holiday or whatever they've been thinking of, or who are seeing their pension eaten away by continuing mortgage payments, equity release could be the answer."
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