Retirement Savings in Drawdown? Think About Equity Release [part1]
So many people are struggling with this prolonged recession. Listening to the news, it doesn't look to be getting any better any time soon. Meanwhile, those who recently retired thinking they had a large enough nest egg or pension to support them, have watched the markets slash the value of their investments and pensions, while interest rates keep savings accounts providing little or no value at all. Some people just need a bit of extra help financially, for themselves or others in their family. These people should seriously consider home equity release schemes.
What is equity release?
The basic definition of equity release is simply finding a way of getting money out of an investment. For most people, the most important investment they have is their home, so most plans are mortgages on property assets called lifetime mortgages. These are not a standard mortgage, the kind that has just been paid off once retirement has been reached. Rather they are a specialist lifetime mortgage that has specific features for the people over 55 years of age that they are restricted to.
A lifetime mortgage is principally the same as re-mortgaging your home. However, the financial adviser who helps you set up the equity release plan has a number of potential options to offer any prospective applicant. Some people like having their equity release loan paid to them in a single, one-off lump sum - just like a traditional mortgage. Others may require the tax free lump sum to be paid in stages, rather than all at once. A less common request is for the money to be paid as a regular income.
What can the tax-free cash be used for?
This arrangement is excellent for someone looking to enhance their retirement lifestyle by way of renovating their home, build an extension or make a gift to their children. By re-investing funds taken out of your property will have a longer term positive effect on the final value of the property once it is sold. This will be of interest to your children & their inheritance.
Therefore, people looking at a release of equity should not consider lifetime mortgages as a poor choice, as although they are taking cash out, they are upgrading the home & hopefully adding or helping to retain its value.
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