There are many lessons that can be gleaned from the pandemic in 2020. Being intelligent and forward-thinking with personal finance is one of the biggest lessons to take away from the pandemic with many people’s situations changing drastically this year. One smart finance option which over 55s may want to consider moving forward is equity release which could certainly help to alleviate any financial difficulties suffered this year.
What is Equity Release?
Equity release is a way to unlock the value of your property while you continue to retain use of the home and receive a cash sum. You do not need to have fully paid off your mortgage to do this and you can take the money that you release either as a lump sum or in a number of smaller amounts on which you will pay interest (or a combination). This is usually in the form of a mortgage that isn’t paid off until you die – this means that you need to factor in if you have people to pass assets onto once you pass away.
Equity release is becoming increasingly popular with rates on these deals falling to record lows in recent times with the lowest rates below 3%. CEO from Equity Release explained why it could be a smart option for over 55s right now:
“With equity release rates starting from under 2.5% and many products allowing adhoc capital repayments or ongoing interest repayments, these flexible plans allow people to proactively manage their borrowing and shore up their finances. Something that is arguably more important than ever given the current economic uncertainty”.
Equity release could certainly be used to alleviate financial concerns for those that have suffered as a result of the pandemic. Many people also use equity release as a way to make home improvements, to clear existing debt, to take a trip of a lifetime, to pay off an existing mortgage or to help out family or friends. It can be a good option for many homeowners over the age of 55, but it is also not a decision that should be made lightly.
Equity release can be an expensive way to borrow and you will also need to think about family and those that you will pass your assets on to. This is why you should always consider your options first, such as downsizing, other financial borrowing or using savings. Additionally, you should always speak to a specialist to see if is the right option for you and to find the best outcome.
Equity release can certainly be a good option for many over 55s looking to boost their financial situation, especially if it has been affected by COVID-19. As with any financial product, though, it is important to take your time to make sure that it is the right decision.