Equity release industry now worth £3bn

THE equity release industry has broken through the £3 billion barrier thanks to over 80,000 new customers signing up to remove equity from their home in the last year.

It is the case that homeowners over the age of 55 are able to release up to 35 per cent of the value of their property in order to receive the funds in one lump sum. This amount will be tax free.

The most important benefit is that families can continue to stay in their existing home which the lender receives a stake in, and is able to recover their funds when the homeowner dies or moves into full time care. Any of the sum that is left over will be passed onto any children had by the homeowner(s) or their next of kin in the form of inheritance.

Why is there such a demand for equity release?

According to accessequityrelease.com, the increase in demand for equity release has been put down to living and ageing in a society where the cost of living is rising. In the past, it was more common for senior citizens to save a certain amount and relied on their pensions, however this may no longer be a good enough way to maintain a high standard of living in the UK.

In addition, the rise in completion in the industry and the use of TB and radio has made the product of equity release far more mainstream and more competitive products available for customers.

How much did households release from their homes?

The average household which sought out equity release withdrew around £62,539 from their home. This is an increase from £59,002 in 2017.

Also known as lifetime mortgages, the financial product assumes that you will continue to live in your estate for the rest of your life. These lifetime mortgages have flexible options allowing you to release all the money you require upfront via instalments to give a more regular income. A homeowner will also have the choice as to whether they want to make the payments in full or in instalments or if they want the product to just run on till they pass away.

A full reversion plan is another option which allows homeowners to receive 20 per cent to 60 per cent of the property’s value but giving up the ownership status of your property by living in the premises as a tenant. This is considered a much riskier option since the house will be appraised under the market value and will limit the amount a person’s children will inherit.

What do homeowners use equity release for?

Data shows that senior citizens will use equity release for a number of reasons. Some will use the product as a replacement for a pension or in order to secure a regular income, which is understandable now that the cost of living continues to rise.

There is further demand for funding home improvements and refurbishments to make their property friendlier for senior-living.

In addition, those who are family-orientated may choose to use equity release as a way to pass on money to their children to help them pay for things like weddings, deposits on a home or tuition.