You only need to look to the internet to know that equity release schemes are growing in popularity, with a wide range of companies advertising their free equity release calculator services so you can see for yourself just how much you can borrow.
So it’s not surprising to find reports highlighting that the first quarter of this year saw a record number of people throughout the UK looking to equity release as way to help pay off mortgage debt; a rise that was predicted a while ago attributed to the pending influx of interest only mortgage borrowers looking to clear their debt.
With £633 million of property wealth being released in the first three months of 2017, that represents an increase of almost 53% compared to the same period last year; a total of 8,604 plans sold compared with 5,447 in 2016.
But does this mean that equity release schemes are now mainstream and could form part of everyone’s journey into retirement years?
Starting the journey with an Equity Release Calculator
Equity release is a massive decision, so the equity release calculator is just a first step in deciding whether it is right for you. It’s a great tool for understanding whether you qualify for equity release or a lifetime mortgage as they are also known, but it is very much as starting point.
Just because the equity release calculator gives you the thumbs up doesn’t mean to say it is right for you. At the end of the day you are reducing your family’s inheritance, so you need to explore all the options and understand the implications before entering into an equity release scheme. This means a conversation with reputable companies but more importantly a conversation with your family too.
In which direction is the money going?
In addition to highlighting the increase in equity release sales, the report also shows the regional variations and stated that the average house price for equity release increased to £322,400; considerably higher than the average UK house price of £217,502. So who are the biggest borrowers are where do they live?
Not surprisingly given the high price of the average equity release property, the number one spot goes to the South East accounting for 28% of 2017’s lifetime mortgage sales and almost double the number of sales made in the first quarter of 2016.
Next on the list is the South West with London following closely on its heels. Only Scotland saw a drop in the actual property wealth released, although the number of sales as with the rest of the country were higher.
Who’s joining the equity release ride?
Equity release these days if often linked to retirement planning, either as a way to supplement retirement plans; pay off outstanding debts and loans or for travel plans or home improvements, which is probably why the average age of the customers surveyed was 72.
In fact the report goes on to show the following uses for the money:
- 62% - Home and / or Garden Improvement
- 32% - Holiday
- 30% - Pay off debts
- 22% - Treat or help family or friends
- 22% - Clear an outstanding mortgage
- 13% - Help with regular bills
The majority of people entering into the equity release schemes were couples but when it comes to the singletons, twice as many females opted for a lifetime mortgage compared to males.
Is it a journey for you?
To work out if equity release is the right option, think about why you want the money and how much you want. Then consider if there are any other options available to you and how you feel about reducing your family’s inheritance.
Then if you are over 55, own your own home and have sufficient equity in your property, use the equity release calculator to see if you are eligible. You can then get a wealth of free information from the experts before deciding whether it is a journey you want to pursue.