Retirees urged to seek advice before releasing equity and spending legacy funds | Personal finance | Finance

As more Britons release equity from family homes to help them make ends meet, experts are warning retirees to think carefully. There are other things they can do to free up some money.

As the real estate market is buoyant, experts warn that more and more retirees are being forced to use equity release.

The average equity release transaction is £125,000 according to data from the Equity Release Council.

That’s seven years of typical retirement income for one person.

David Burrowes of the Equity Release Council said: ‘After years of putting money aside in bricks and mortar, older homeowners are turning the tables and taking money from their homes to raise their retirement income, meet one-time expenses and provide a living legacy for the family.”

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He continued: “With £1m added to the value of UK housing every minute over the past year, the options of housing wealth will be on the minds of many as they make financial plans. for the future.

“The return to growth in the capital release market is part of a broader recovery in end-of-life lending activity, and the flexible design of modern lifetime mortgages gives customers more ways to manage their finances and access life-changing money at a lower cost. .

“While many aspects of today’s market have been transformed in the 30 years since consumer protection measures were put in place, a solid foundation remains in place so that no customer ever has to s worry about owing more than their home is worth and can rest easy knowing they can stay in their home for life without the threat of repossession for non-payment of refunds.

“As we enter an environment of increasing cost of living pressures, the importance of sound advice will be greater than ever so that decisions to release equity continue to provide long-term satisfaction as well as a short-term relief.”

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Meanwhile, owners with capital release schemes could save over £50,000 by switching to a cheaper plan.

Interest rates have halved in recent years, but many people don’t realize they are free to change.

Age Partnership chief executive Matt Stirland said people could make huge savings by switching providers.

He said: ‘Age Partnership customers who switched plans last year will save £51,000 in interest over the average 16-year term of their plan.

Retirees should weigh their options when it comes to freeing up equity and also consider downsizing, according to money-saving expert Martin Lewis.

Mr Lewis said the easiest and cheapest way for retirees to free up money was to move to a smaller house.

He was responding to a caller, named Dee on This Morning in December, who asked, “How can older people who have mortgage-free homes free up some of that equity to spend on themselves instead of struggling more late?”

Martin said: “I would always start by saying look to see if you can downsize.

The financial reporter continued, “It’s the easiest and cheapest way for a lot of people.

“Move to a smaller house and because you’re moving to a smaller place, you free up equity that way.”

Mr Lewis explained that he has never been a big fan of capital release mortgages, although he understands that they are sometimes a necessity.

He concluded, “If you want to do this, take what little you need when you need it.”