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Using your biggest asset

Property and the equity within it are no longer the hidden answer to money worries
 
A version of this article appears in our guide to Managing Debt in Retirement. Get your free copy today.
 
For most of us, the most expensive purchase we’re ever likely to make is our home. And so in turn, it often becomes our biggest asset, especially once the mortgage is paid off. With more people discovering that their retirement lives will be longer and more expensive than they once thought, it’s not surprising that many are looking at ways to make their biggest asset work harder, providing them with more than just the roof over their heads.
 
Recent research shows that the over-65s are in possession of more than £1 trillion in property wealth: picture that as a one with 12 zeros after it. Since 2010, retired homeowners have seen their property value grow by 41% on average, or by around £68,500 for every over-65 homeowner.* While there are the regional variations that one might expect, it nonetheless shows that property remains dependable even in these uncertain times. As such, one can see why more and more people are turning to their property assets to boost their finances in later life.
 
Equity release is an increasingly popular means by which to do this and make the most of the value in your property. Put simply, your equity is the value of your home minus any debt (a mortgage or other loans) you have secured against it. An equity release plan will allow eligible homeowners aged 55 to 95, with property worth £70,000 or more, to unlock some of the cash from their home, most usually in the form of a lifetime mortgage.
 
Whether equity release is used to clear existing debt or improve one’s standard of living, among the benefits of it is the fact that this is tax-free cash. That said, taking equity out of your home may have an impact on your ability to claim means-tested benefits. However, untapping the potential in your home through equity release is likely to be less stressful than downsizing, with the added advantage that this way, you get to stay in your home.
 
With the long-term housing market still encouragingly robust, equity release is certainly an option that eligible homeowners might want to consider. However, you should always think carefully before securing a loan against your home. You should also remember that equity release will reduce the value of your estate and may affect your entitlement to means-tested benefits. If you're considering equity release, please read 'Is it right for you?'carefully. *Citigate data 2017

 

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