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Equity release continues to surge in popularity, with thousands of older homeowners every year capitalising on the opportunity to free up some of the cash held in their home. But just what do they do with all that money? Well, Saga has taken a look.
The analysis found that the way people are choosing to use the money they release has changed dramatically over the last five years, with more emphasis placed on future-proofing their homes and providing an inheritance.
Indeed, home improvement has been the main reason people choose to withdraw equity since 2012 and has risen by 10% over the five-year period, with two-thirds of people using the money on anything from new kitchens and bathrooms to essential maintenance or adaptations, typically spending over £13,000 in the process.
Passing on a gift to younger generations is also increasingly viewed as essential, and the amounts gifted have risen dramatically, by over a quarter since 2012, with an average of £33,000 now being given to help with things like house deposits, weddings or education costs.
Then there's the desire for an emergency fund, yet while it remains important, it appears to be less so than previously: in 2012, 40% of people withdrew money for this reason, but this has now fallen to just 25%, with an average of £3,600 being kept aside for unplanned spending.
However, analysis suggests that this may reflect the growing popularity of drawdown plans, which allow customers to take money from their home as and when they need it, rather than opting for a fixed lump sum – and therefore incurring interest on the full amount from the outset.
"Our research demonstrates that equity release is increasingly being considered as a mainstream solution for future proofing their homes and income for later life, making them less dependent on the state," said Gloria Barker, head of products at Saga. "That's a big change from the traditional perception that it is limited to those who find it hard to make ends meet.
"While people are beginning to see their house as an asset to fund later life rather than something for their family to inherit, this does not mean that they are not prepared to help family out financially. By far one the biggest chunks of money they withdraw is to gift to their relatives, showing that they are keen to pass their wealth on down the generations."
Whether you'd spend the money you released on home improvements, a gift to younger generations, an emergency fund or indeed anything else, it can't be denied that now could be a great time to get in on the action. Indeed, our own research shows that average equity release rates are falling dramatically, which could save you thousands of pounds in interest over the duration of the lifetime mortgage.
So why not take advantage? Start the process by contacting our no obligation equity release advice service, and see if you can benefit from the money built up in your home.
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