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The options for how you can use equity release

Outlining what you can use the money from an equity release loan for.

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By Pete Mugleston  | Mortgage Advisor Pete has been a mortgage advisor for over 10 years, and is regularly cited in both trade and national press.

Updated: 26th June 2019* | Published: 27th February 2019

What can you  use equity release money for?

We receive lots of enquiries asking what can the funds from equity release be used for. The good news is that the money from your property, once liquidised, is yours to do with whatever you desire.

As equity release is aimed at those who have reached, or are approaching, retirement there are lots of practical uses which people may want to use their money for.

Once you’ve read through the information below, make an enquiry and we can arrange for an equity release specialist to contact you and discuss how you could put the money toward something property related. .

In this article we will cover:

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Why choose equity release?

If you’re aged 55 or over and find yourself rich in property assets but rather light on actual cash in the bank, equity release can be an effective way of redressing the balance.

As UK property prices continue to rise, equity release offers eligible homeowners the opportunity to take advantage by unlocking part of this increasing value from within their property.

This type of lending has the added benefit of allowing you to borrow money with no compulsory requirement to make regular payments during your lifetime. Any interest accrued is rolled up on top of the original amount and repaid, through the sale of your main residence, either when you die or move into a care home.

Equity release is becoming more and more popular throughout the UK. In the first half of 2018, almost 39,000 eligible homeowners withdrew, on average, just under £78,000 from the wealth within their home (up from a little over £70,000 in 2017).

The money you unlock can be used for whatever you desire with recent research suggesting 63% of equity release applicants planned to use their funds for home improvements and 22% looking to repay their mortgages.

There is, however, much more to equity release than outlined here. If you’re interested in this form of lending, take a look at our detailed guide

Can you use equity release to pay off a mortgage?

Yes you can. As the usage of debt has become more widespread, it is now much more typical for homeowners to carry their mortgage debt into retirement. Many people are also starting out on the housing ladder much later in life whilst carrying credit card and student loan debt through their peak working years.

The downside of this is a lack of proper pension provision coupled with many companies closing down their defined benefit schemes (based on years of service) in preference for defined contribution schemes which rely much more on the underlying fund performance.

As a result, retirement can lead to a significant drop in income. An equity release mortgage offers homeowners the opportunity to pay off part or all of their remaining conventional mortgage in one transaction, therefore, releasing them from the chains of regular repayments.

It’s not unusual for an equity release provider to request repayment of any existing debt upon completion as part of a new lending agreement, regardless of what your original plans were for the money.

You also need to be aware that the accrued interest will increase over time and will, inevitably, affect the amount of equity you may wish to bequeath to any relatives upon your death.

If you’d like to find out more about how equity release can help pay off your mortgage, make an enquiry and we will arrange for an advisor we work with to contact you directly.

Can I use equity release to buy another house?

Absolutely. If you’re considering buying another property and you’re eligible for equity release then, yes, this is definitely a viable option.

Lots of people each year approach us to discuss the opportunity of buying a second home. If you’re approaching, or have reached, retirement you may feel limited as to how you can raise the necessary finance due to the affordability guidelines in place for conventional borrowing methods.

Affordability criteria, with the focus on income and outgoings, could restrict how much you can borrow for a traditional mortgage if you’re solely reliant on a modest pension income.

As equity release mortgages don’t require compulsory repayments,therefore, aren’t bound by the same lending guidelines, this form of borrowing could cater for your needs if you’re looking to buy a second property, holiday home abroad or even a buy to let investment.

If you get in touch we can arrange for an equity release specialist to discuss this area in more detail.

Can I use equity release for home improvements?

Yes, you can. As a matter of fact, recent research suggests the majority of equity release mortgages (63%) are sought for this very reason.

As with second properties, seeking more conventional borrowing for large renovation work can prove difficult if affordability becomes a factor. Equity release schemes focus more on the age and health of an applicant rather than the amount of income they have.

As the value of your property is also a factor, any structural improvements should only result in an increase in value, therefore, assisting with the overall equity position of your main residence.

If you’re considering equity release in order to carry out renovation work to your main residence and would like to speak to an expert, make an enquiry and we can arrange this on your behalf.

What else can I use equity release for?

In a nutshell - anything. In addition to paying off mortgage debt, buying a second property or home improvements, here’s a list of other popular uses for equity release:

  • Dream retirement holiday
  • Extension or loft conversion
  • To clear off debts/debt consolidation
  • Financial assistance for relatives
  • Paying off school fees
  • Vets bills
  • Buying a car
  • Care home fees
  • Donating to charity

Can I use equity release to purchase a buy to let investment property?

With some lenders, yes. Many people feel that purchasing a buy to let property using spare equity in their main residence makes quite good business sense as you can use this property as a means to raise fresh avenues of income for you and your family.

But be aware that some lenders don’t permit equity release on UK properties in order to purchase a buy to let overseas - talk to one of the expert advisors to find out which lenders will let you release equity for an overseas BTL.

Can I use equity release to buy a holiday home?

Yes, certainly. Once you’ve retired you may wish to spend more time at your favourite holiday location, therefore, buying a holiday home can, sometimes, make more sense rather than spending on hotels.

Can I use equity release to buy student accommodation?

Yes, absolutely. You may have children who are about to start university and, in some instances, it make more financial sense to buy a flat or house which can be used for investment purposes once they complete their studies.

If you’re interested in finding out more about buy to let opportunities, buying a holiday home or student accommodation using equity release, make an enquiry with us and we can ask a specialist to contact you directly.

Why you should speak to an expert equity release broker

At Online Mortgage Advisor we can offer you a first-class service tailored to your own specific needs with access to the most experienced brokers available that:

●     Have whole of market access

●     Have excellent relationships with lenders

●     Are OMA accredited advisors

●     Have completed a 12 module LIBF accredited training course

Speak to an equity release expert

If you have questions and want to speak to an expert for the right advice, call Online Mortgage Advisor today on 0800 304 7880 or make an enquiry here.

Then sit back and let us do all the hard work in finding the broker with the right expertise for your circumstances.  – We don’t charge a fee and there’s absolutely no obligation or marks on your credit rating.

Updated: 26th June 2019
OnlineMortgageAdvisor 2019 ©

FCA disclaimer

*Based on our research, the content contained in this article is accurate as of most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The info on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs. Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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