How equity release could help fund your retirement

Article written by Mortgage Advice Bureau Later Life, our preferred equity release partner. 

This article is not intended to be financial advice to any individual. The views expressed are those of the author and Moneyfactscompare.co.uk does not endorse the content. 

Retirement is a phase of life that many come to anticipate after decades of working, raising families, and managing the ins and outs of daily life. Whether it’s relaxation, exploration or personal fulfilment, retirement should feel like a breath of fresh air.

However, financial constraints may hinder the realisation of these goals, even more so now with the rising cost of living and increasing energy and utility bills.

Equity release could be a solution to these financial burdens, as it allows homeowners aged 55 or over to unlock some of the value of their property. Let’s explore how equity release could help fund your retirement.

Equity release is a financial arrangement available to homeowners aged 55 or over and it allows you to access some of the equity built up in your home. A lifetime mortgage is the most common form of equity release, it involves borrowing against the value of your home without the need to sell it.

A lifetime mortgage comes with several benefits but the most notable is access to tax-free cash, which you can use for a variety of different purposes. It’s important to note that equity release will reduce the value of your estate and may affect your entitlement to means-tested benefits, so it’s something to consider if you’d like to leave an inheritance after your death.

Whether your retirement goals are  to consolidate your existing debt, see more of the world, or spruce up the home you’ve been living in for years, unlocking some of the equity in your home could open the door to these possibilities. Here’s how:

For those approaching retirement, carrying existing debt into your post-work years can feel like a burden. However, equity release can help alleviate the stress of this by paying off existing debt, such as credit cards, personal loans or outstanding mortgages. You should always think carefully before securing a loan against your property.

Monthly repayments on a lifetime mortgage are not mandatory as the loan, plus roll up interest, is repaid when the plan comes to an end. That being said, you can opt to make repayments to cover the interest accumulated as well as the capital, which could reduce the overall cost of borrowing. Partial repayments of up to 10% of the initial loan amount can be made without an early repayment charge.

Paying off existing debts can free up additional cash flow, offering peace of mind during your retirement. Instead of worrying over monthly payments, you can redirect those funds to enjoying your retirement to its fullest.

A drawdown lifetime mortgage gives you more freedom than a lump sum plan because, after an initial lump sum, you can release money when needed (subject to minimum amounts). We’ll touch on drawdown lifetime mortgages in a moment.

You can use equity release to help transform your property into something more comfortable, convenient and accessible for your retirement years. Whether it’s renovating your kitchen, adding an extra bedroom for family and guests, or installing mobility aids, investing in home improvements here can both enhance your quality of life and future-proof your living space.

Any structural changes to the property must be approved by your lender.

Equity release can be used to help financially support loved ones and, in this case, you can consider any money you give to family as a living inheritance. Whether you want to provide financial assistance to your children or grandchildren, contribute to their education, or help them buy their own property, the funds you release from your equity can serve as both a gift and an investment in their future.

If you have opted for a drawdown lifetime mortgage, you have more flexibility to adapt to your changing needs in retirement. While you can release funds from an agreed cash reserve, it is important to note that drawdown facilities aren’t guaranteed.

Perhaps you’d like to have that large celebration of your anniversary, home improvements or that once in a lifetime trip. You will accrue interest on these amounts at the prevailing interest rate when you drawdown.

Retirement often offers an opportunity to explore new projects or endeavours and it’s a great time to explore new hobbies and leisure activities, perhaps things you wish you’d had time for when you were working. Whether it’s joining a golf club or enrolling in art classes, having fewer financial commitments can help free up additional funds to help you explore these new opportunities.

Equity release can offer options and provide accessibility in your retirement. By unlocking some of the value tied up in your property, you could enjoy more financial flexibility, enhance your quality of life and maybe even embark on a new adventure.

It is important to always work with someone you trust, and you cannot pursue equity release without speaking to a qualified equity release adviser. They will be able to help you find a solution that is suitable for your circumstances and needs. If they don’t think equity release will be an option, they’ll talk you through why and what steps you can take to explore alternatives outside of their services.

Mortgage Advice Bureau Later Life offers lifetime mortgage products from a carefully selected panel of providers. Mortgage Advice Bureau Later Life offers lifetime mortgages only, which is a loan secured against your home.

Equity release will reduce the value of your estate and may affect your entitlement to means-tested benefits. You should always think carefully before securing a loan against your property. Unless you decide to go ahead, Mortgage Advice Bureau's Later Life service is completely free of charge, as their advice fee of £1,295 is only payable on completion of a plan.

Telephone calls may be monitored or recorded to enable us to improve our service to you. Mortgage Advice Bureau Later Life is a trading name of Key Retirement Solutions Ltd, which is authorised and regulated by the Financial Conduct Authority. Registered in England No.02457440. Registered Office: Baines House, 4 Midgery Court, Fulwood, Preston, Lancs PR2 9ZH.