Equity release is a phrase we hear and read about so much and yet do we really know exactly what it is ? I decided to do my own research into equity release as, at my age ( 55 ) I have started to think about about the future and how we might plan our life, even before we head into retirement.
As we get older, we naturally become more mindful of our life and how we might use our time fruitfully. Of course there are many ways we can enrich our life free of charge, like walking in the countryside, but sadly many things we want to do in our life costs money. It is a sad fact, but a real fact.
Around the age of fifty five most people find they are either mortgage free or have just a small mortgage left to pay. I can remember taking on my first mortgage at the age of nineteen and feeling all grown up. I also felt scared that I had taken on such a huge debt. Of course it wasn’t a huge debt ( it was actually £10000 ) but it felt overwhelming at the time as my only debt at the time was the £400 overdraft I had acquired at university.
At a time in our lives though, when our children have left home and most or all of our mortgage is paid off, we suddenly yearn for extra cash to do all those exciting things that we never got chance to do, due to bringing up our family. So where can we get this extra cash from ? Apart from a win on the Lottery of course ! Well, here is where equity release comes into the picture.
So exactly how does equity release work ? Basically, equity release is the means of releasing capital ( cash ) which is tied up in the home you already own. This cash is tax free and you don’t have to sell your home or downsize and so you don’t have to pay expensive legal fees, stamp duty and other expensive moving costs. On releasing this money from your house, you still own and live in your house and best of all you now have a cash sum to fulfil all those dreams you have for your life now. You don’t have to pay back monthly payments ( although you can if you wish ) But you can simply add the loan plus interest to your home and this will be repaid when you pass away or go into long term residential care. But the best thing about equity release is getting the cash now while you are still young and able to enjoy it. Now to me that is a win win situation. For me I have so much I want to do in my life while I am still fit and active, but many things on my wish list cost money. I don’t want to wait till I am too old to fulfil my dream list. I want to be out there in the world now, visiting exciting places, creating new memories and enjoying my life. And as winning the lottery is a long shot, then equity release seems a great way to do this.
So what is equity and how much can you expect to get ? Well, equity in your home is basically the difference between the market value of your home and any outstanding debt / mortgage on the house. So if your house is worth £300,000 and you have paid off your mortgage then you actually have £300,000 equity in your house. If you have an outstanding mortgage of £100,000 on your house then you have £200,000 equity and so on.
For the amount of equity release you might expect to receive I would advise you to speak to someone trained in this field. There are many companies out there who offer help and advice on this and you can often find equity release calculators online, which will at least give you a rough idea on how much you could apply for. ALWAYS take your time making such a decision and always take expert advice on it. This is crucial for any financial decision you make in life, whatever your age and circumstance.
Ok, so now to the exciting part. If you had cash from equity release what would YOU spend it on ? Let me share a few thoughts of my own about this. I will try not get carried away here, but I must admit I have enjoyed thinking about what I would do with my equity release cash.
So firstly I would look at home improvements. I mean, if you are going to stay in your home, then why not improve what you have ? A nice fitted kitchen would probably cost around £7000 and just think of the nice meals you could prepare for the family in that nice new oven. A bathroom would be top of my list too. As I get older I really value long, hot baths as I now have the time, without the children shouting for my attention every two minutes ! I would love a really sleek, contemporary bathroom, maybe with a nice spa hydrotherapy bath which would be lovely to ease my aching joints after a strenuous gym or yoga session. ( Yes, I am sounding old now, but that’s reality ! ) I have recently been to price up a new bathroom and am shocked at how expensive they are ! For a top range bathroom you are looking at around £7000, so a nice pot of cash from equity release would be very useful for my new spa bath.
Now your children have left home doesn’t mean to say that you still don’t see them. In fact in our home, we still find ourselves hosting large parties, celebrations and meals for our ever expanding family. From my three daughters I now have three son in laws and one grandson, so you can imagine how busy we get in the house. With this in mind a few years ago, we had a conservatory built onto our house which now serves as our dining room. And VERY useful it is too for our family meals. Our conservatory cost around £20,000 fully fitted and while the extra space is useful for the ever growing family, don’t forget it can also add value to your house. A great way to use your equity release money I think.
The next thing on my dream spending list with my equity release money would be on travel. Travel to me is a way of creating new and exciting experiences that I have been unable to fulfil due to children and family commitments. It is only when you are free of independent children that you can start looking at those holidays you only dreamed of. Sadly these holidays can be expensive especially when, like us, you want to take more than one holiday a year. Holidays abroad are fabulous but don’t forget those weekends away here in the UK can also be great fun. As life flies past so quickly, I find myself yearning more and more to travel and experience new places and new cultures before I get to a stage where I am too old to travel. I know that may sound depressing and I don’t want to make you feel like that but, if you are over fifty, you have probably had the same feelings too. We just choose not to talk about it.
I know of a few semi retired couples who have actually bought holiday homes abroad after releasing capital in their home through equity release. While they are still working part time they visit their home abroad as often as they can, with the intention of moving abroad permanently once they retire. Have you seen the great bargains you can get buying property abroad ? I love to watch all the holiday property programmes on TV and am amazed at the price of property abroad. I saw someone recently buy a villa in Spain for £100,000 WITH A POOL ! I think that would suit me very nicely.
As you know I am a huge advocate of fitness and generally keeping fit as we get older. So how about using that cash from equity release to start a new hobby with your partner ? My husband and I have recently taken up golf so we can spend quality time together AND keep fit, which is so important as we get older. Golf memberships can cost around £2000 per year, per couple, which is a substantial amount of money to find every year without equity release. But if you can use your released cash, just think how regular golf can help your health, relationship and social life. Another great way to use your cash AND improve your health is to join a gym. Many gyms have swimming pools as well so you can explore many different ways of fitness, as well as improving your social life. Gym membership can vary depending on the facilities but can cost anywhere from £30 – £100 per month. If you really can’t face joining a gym and many people do struggle, then why not create your own gym at home ? If you have a spare room ( now the children have left home ) why not fill it with your favourite gym equipment and make a promise to yourself to use it every day for just half an hour. You will soon feel the benefit both mentally and physically.
Another way to use your cash from equity release is to help family. Yes, we suddenly stop paying for our childrens every day needs once they leave home, but we also love to support them during major events in their lives. Equity release could help you pay for your children’s university fees, wedding, deposit on their first home and even help when your first grandchild arrives. My big dream is to treat my family to a fabulous holiday to Florida as we all love Disney. We went to Florida when my children were still young and at home, and we had the holiday of a lifetime. I would so love to re create those fabulous memories but with them as grown ups and with their own children. How amazing would that be ? Have you anywhere you would love to take all your family ? Perhaps a special place that you all love ?
Finally I would like to talk a little about how equity release cash can help you in your day to day living expenses, which are not exciting to talk about, but very necessary. Maybe you have existing debts either from a loan, credit card or even your mortgage ? What a relief to pay them off leaving you completely debt free, knowing you have used your own capital in your house to pay them off.
Sadly as we get older we start acquiring new health issues that can interfere in our daily enjoyment of life. Whether its a new hip replacement, physiotherapy for an ongoing joint problem or even a golf injury, all these niggly aches and pains can stop us in our tracks. As fabulous as our NHS is, sometimes the wait list for certain operations can be so long, that we have to put our life on hold for quite a few months. Having the cash available from the equity release means that we can pay privately for an operation and get ourselves back to good health a lot quicker.
I always think of my lovely father when I think of my final suggestion for your equity release cash. My father frequently told me to ALWAYS have a pot of cash for emergencies. Did your parents tell you the same ? It’s those emergencies that happen at the worst time. The car breaking down, but you need it to get to work. The boiler developing a huge fault but you need it to heat the hot water and the house, as it is winter after all. You get the idea ? Those emergencies can happen at any time and it’s reassuring to know that we have the means to resolve the issues quickly and with little worry.
So that concludes my overview of equity release and also some ideas to give you food for thought what you could do with the extra cash. As I mentioned before there are many ways to enjoy life without money, but there are a LOT more ways to enjoy life with cash in our pocket. Having the security of cash in our hand takes away a lot of stress, that quite honestly, we could do without as we get older. I am all for a stress free life and a life full of fun and happy experiences.
If you have experience of equity release please comment below. And let me know how YOU would spend your extra cash. What are your dreams ? Where would you travel to ? What home improvements would you make ? What would you do if a nice pot of money dropped into your bank account right now ? To give you a few more ideas please click on this link. https://www.sunlife.co.uk/money/equity-release/dream-shopping-basket It will certainly open your eyes to the possibilities that are before you. It certainly has got me thinking about my own future and more importantly, that fabulous family holiday to Florida that I am so keen to take !
Until next time dear friends
Always seek expert financial advice before making any financial commitments or decisions.
** This was a sponsored post by Sun Life but the words and opinions are my own **