An Equity Release Calculation Could Help Your Retirement Plans
Financial planning during retirement is becoming increasingly important. With rising living costs, growing costs of care, and a shrinking public expenditure budget, it is only wise to use your financial assets optimally to provide for you during retirement. It is no surprise then that equity release plans have become so popular among older homeowners in recent times.
Equity release plans offer a way to tap into the equity tied up into a home in the form of a cash lump sum or monthly cash payments and use it towards anything you wish. The money is repaid only when the property is sold, which is usually upon death or when you move into permanent long-term care. There are no restrictions on what the money can be used for, and it allows a way to use the cash from your home without the need to sell and move out. Equity release therefore offers a way to optimise your property value without any restrictions on what the money can be used for.
Reasons for releasing equity
Different people may use the release of equity for different purposes. For instance, someone may need a cash lump sum for a holiday, home repairs, or for a cash gift for grandchildren. Cash flow can often be a problem during retirement, and some people may need a regular income to supplement their retirement income in order to maintain a comfortable lifestyle.
Just as there are various reasons for people to want to access the equity tied into their home, there are different equity release plans available on the market to suit different client’s retirement needs. Obtaining an equity release calculation can help one not only to work out the maximum borrowing through any given equity release plan, but also to understand how the money can be borrowed. For instance, whether it can be borrowed as a single lump sum, as regular monthly payments, or as and when required, through a drawdown lifetime mortgage scheme.
Facilities for monthly income?
Most people use an equity release calculation to work out the maximum amount they could borrow, and to understand how this money can be used optimally to get the best returns. While some people may best benefit by borrowing in the form of monthly installments, unfortunately this is not an available option with any of the current drop of equity release companies. The only previous lifetime mortgage provider that offered a monthly income option was from Northern Rock & we all know about their demise!
Therefore, if a regular income is required borrowers will need to consider other options. This may come in the form of the more flexible lifetime mortgage schemes and may choose to borrow through a drawdown lifetime mortgage scheme. Some may also choose to borrow the maximum amount and use it to purchase an annuity or other investment product, although using equity release to purchase a market linked investment product could be potentially risky due to the uncertain returns available in the markets. In fact, other than to create an emergency fund, equity release schemes should never be used for investment purposes and is something a qualified equity release adviser should never recommend.
A qualified equity release adviser can help you understand how an equity release calculation can be performed and the money released best used. The first step to understand how releasing equity could potentially help you during your retirement would be to use an equity release calculator to work out how much money you could release through different equity release plans, and how it could be used optimally to plan for your retirement. Once the parameters have been established & monetary figures confirmed the application process can begin in order to convert your wishes into reality & retirement plans fulfilled.