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Could your home help fund your retirement?

Could your home help fund your retirement?

Category: Retirement

Updated: 07/04/2015
First Published: 31/03/2015

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Your home is your biggest asset, so if you're approaching retirement, you could be thinking of ways to make it work harder for you. Well, you're not alone, as research has revealed that a large number of those nearing retirement age are finding ways to unlock the value tied up in their homes…

A third plan to use their homes to fund their retirement

According to a survey from Audley Retirement, the majority of wealthy over-55s (categorised as those with houses valued at £300,000 or more) have firm plans in place to fund their retirement. Over half (57%) of those surveyed said a private pension would be their main source of income, while 19% felt they have sufficient savings to act as their main revenue stream, and 33% are planning to use equity from their home to help fund their future.

Given that more people aged 65-74 own their own homes than any other age group, this could be a viable option for many. Being able to utilise the equity locked up in your home – something that's particularly appropriate if you've managed to pay off your mortgage – has the potential to help fund your post-work years, and you needn't even be in the 'wealthy' category to benefit. But just how could you go about it?

Equity release – unlock the value without moving home

Equity release is a way of unlocking the value of your property without needing to sell the family home, and it's growing in popularity. Latest figures from the Equity Release Council showed that 2014 was a record-breaking year for equity release, with more homeowners than ever opting for this kind of lifetime mortgage arrangement.

And a lifetime mortgage is exactly what equity release is. In essence, you sell a portion of your home's value to a mortgage company, usually in exchange for a tax-free lump sum (alternative drawdown arrangements are also available). You're then free to spend that windfall however you wish, be it on making home improvements, treating the family, enjoying a few luxuries or simply to provide a valuable income stream throughout retirement.

This method means you're able to release the equity locked in your home without needing to move, and nor do you need to make repayments – the company gets their money back when you eventually sell your home in its entirety. Of course, there are drawbacks – you'll be charged interest and will leave less as an inheritance, for example – but for some people, it could be a viable possibility. Speak to an adviser for a no-obligation consultation.

Downsize and stay mortgage-free

However, another option, and one that would be preferable for those who want to stay mortgage-free, would be to downsize. This will allow you to free up thousands of pounds while still owning your home outright, and although it'll usually mean moving out of the family home and into a smaller property, it could be worth it. You'll save money in the longer term, too, as smaller homes are generally cheaper to run and maintain, so your bills and other housing-related outgoings will probably be lower.

Of course, it all comes down to your own personal circumstances, your financial situation and, above all, your preferences. But, either way, there's every possibility that you could use your home to help fund your retirement, giving you a valuable income stream that can help you to live your post-work years in comfort.

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.