Equity release uses are not just limited to funding retirement, as many may believe. 

For example 1 in 3 people in the UK used equity release to pay off their debts in 2022, demonstrating its versatility in financial planning.¹

This guide sheds light on the diverse uses of equity release mortgage loans in the UK, from managing debts to making lifestyle upgrades.

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Let us take a closer look…

What Are Equity Release Funds?

Simply put, equity release funds allow homeowners to convert their property into a financial asset, ensuring financial security during their later years.

What Are Common Uses of Equity Release?

The main uses include accessing retirement income or paying off your mortgage.

It is a flexible strategy with a plethora of applications that many are not aware of. 

Use # 1: Can Equity Release Settle Your Mortgage?

Yes, you can join the 27% of later life borrowers who used property value to settle their mortgage.²

Bear in mind that most providers will only give you a plan if your mortgage is relatively small.

There is also the debt plus accumulated interest on loan to consider, which is usually repaid when the homeowner passes away or moves into long-term care.

Use # 2: Is Equity Release a Solution for Interest-Only Mortgages?

Releasing property value can be used as a solution for an interest-only mortgage when the term ends and the capital debt needs to be repaid. 

It works by releasing a portion of your property's value as a lump sum, which can then be used to settle the outstanding mortgage balance. 

By doing this, homeowners can stay in their property without the need to sell it to repay the mortgage. 

Keep in mind

This method could lead to higher interest costs over the long term, as interest is accrued on the equity release loan.

Use # 3: Can You Acquire Additional Property with Equity Release?

Releasing equity can facilitate property purchase by unlocking the capital tied up in your existing home, converting it into a lump sum. 

This amount can then be used as a down payment or even to fully purchase an additional property, such as a holiday home or investment property. 

It essentially offers a mortgage-free route to property acquisition. 

However

It is important to note that this will increase the total interest accrued over time and can reduce your estate's value.

Use # 4: Can Equity Release Resolve Debt Issues?

Your property value provides a significant cash influx that can be used to consolidate and repay existing debts. 

Whether it is high-interest credit card debt, personal loans, or other financial commitments,  the funds generated through releasing property value can help clear these debts, potentially reducing monthly payments and easing financial pressure. 

For instance, 30% of over 55s have credit or store card debt.³

In effect, this strategy can provide a fresh start, eliminating the burden of debt and making financial management easier. 

It is crucial to consider the long-term impact, as the accumulated interest on equity release can be substantial over time.

Read More: Can You Get Equity Release with Bad Credit?

Use # 5: Is It a Pathway to Care Funding?

Equity release can be a vital source of funding for various care costs. 

This can cover: 

• Home adaptations for improved accessibility
• Hire care services 
• Pay for care home fees

Thus, it offers a means to maintain quality of life and independence during your later years without having to move or sell your home.

Use # 6: Can You Conduct a Partner Buyout via Equity Release?

Releasing equity facilitates a partner buyout by allowing homeowners to tap into their property's value to secure a lump sum. 

This lump sum can then be used to buy out a partner's share in the property during situations such as a divorce or separation. 

Thereby negating the need to sell the property, ensuring the homeowner can retain their home while providing a fair settlement to their former partner. 

As a result, it can offer a less disruptive solution to asset division during such challenging times.

Use # 7: How Can Equity Release Be Used for Gifting?

Your home’s value can serve as an efficient vehicle for generosity, providing a significant financial boost to loved ones during your lifetime. 

By releasing the wealth tied up in your property, you can offer financial aid to family or friends, for example, contributing to a house deposit or supporting their education.

Around 13% of customers allocate the funds for family gifts, typically averaging £4,043.⁴

Furthermore

This generosity can potentially reduce your estate's inheritance tax liability, as it lessens the value of the property owned at the time of death. 

Use # 8: Are Home Improvements an Optional Use?

It can provide a substantial lump sum or smaller, regular payments, which can be used to fund various home improvements - from renovations and extensions to minor modifications. 

Approximately 39% of equity release customers have allocated the released funds to enhance their properties, with an average expenditure of £11,100.⁵

These improvements not only enhance your living conditions but can also increase the value of your home. 

Use # 9: Can Equity Release Be Used to Hire Homecare Help?

Equity release can be used to hire homecare help, which could range from hiring a professional care assistant to installing necessary equipment for a safer and more comfortable living environment. 

This strategy eliminates the need to move to a care home or stress about ongoing homecare costs. 

Thus, these products ensure you can maintain your independence while receiving necessary care right at your own home.

Use # 10: Can Equity Release Fuel Lifestyle Aspirations?

Equity release offers a flexible way to finance significant lifestyle purchases during your retirement. 

By unlocking a portion of your property's value, you can afford to pay for luxury items like a new car, world travel, or fulfilling lifelong passions without the need for monthly repayments. 

The 3rd most-popular use of equity release funds is for holidays, with customers spending an average of £6,500 on travel.⁶

This method can greatly enhance your retirement years, allowing you to enjoy life's pleasures that your regular pension may not cover. 

However

Remember that the interest accumulates over time and will be deducted from your estate's value, potentially impacting your beneficiaries' inheritance.

Use # 11: Can Releasing Equity Fund Further Education?

An equity release product can be utilised to finance higher education expenses, whether it is for you, your children, or even your grandchildren.

By unlocking some of the value in your property, you can secure a lump sum or smaller, regular amounts to cover tuition fees, accommodation costs, and other related expenses. 

This method of funding can alleviate the financial stress associated with higher education, allowing students to focus more on their studies. 

Use # 12: Can Equity Release Be a Catalyst for Business Ventures and Investments?

Your property value can serve as a considerable source of capital, offering you the necessary funding for a variety of investment opportunities. 

This could range from starting a new business, buying a second home, diversifying your investment portfolio, to investing in property or stocks. 

By leveraging the value locked in your home, you can take advantage of potentially profitable ventures without dipping into your savings or taking out high-interest loans. 

Use # 13: Can Equity Release Supplement Retirement?

Home equity can play a pivotal role in supplementing your retirement income, thereby boosting your financial comfort during these years. 

By unlocking the wealth tied up in your property, it can provide a steady stream of income or a lump sum.

This can help to:

• Cover living expenses 
• Fund leisure activities 
• Pay for unexpected costs 

While 27% of customers intend to use the money for early retirement, only 13% have actually used the funds to stop working, indicating a gap between intention and action.⁷

In essence, it acts as a safety net, offering peace of mind knowing that additional funds are available when needed. 

Use # 14: Can Equity Release Enable Early Inheritance?

Releasing equity can enable early inheritance by advancing a portion of your estate's value to your loved ones during your lifetime, rather than having them wait until after your death. 

This not only provides them with financial support when they may need it most, but also allows you to witness the benefits your legacy brings. 

An additional 7% of customers use the funds for early inheritance, providing gifts averaging around £11,040.⁸

There is also the advantage of decreased inheritance tax, but it is recommended that you consult with an independent financial advisor for more information pertaining to your situation.

Common Questions

Conclusion

Your home equity can provide a flexible funding solution for a variety of purposes, whether it is financing a dream holiday, consolidating debts, or supporting your grandchildren's education. 

You need to approach the decision with careful thought and consideration, taking into account the impact on your future finances and any potential inheritance. 

It is equally essential to seek professional advice to fully understand the implications and commitments. 

From paying for a new car to facilitating home renovations, the uses of property value are plentiful, showing it as a versatile tool in modern financial planning. 

If you are considering unlocking the wealth tied up in your home, get in touch with a reputable advisor today to explore how equity release uses can be tailored to your individual circumstances and needs.