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What can I do with money from equity release?

From providing a more comfortable retirement to funding the trip of a lifetime, there are many options for using money from equity release.

From providing a more comfortable retirement to funding the trip of a lifetime, there are many options for using money from equity release.

Written by
Sajni Shah
Consumer expert on money and utilities
11 AUGUST 2020
3 min read
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How equity release payments work

With a lifetime mortgage, you have the option of getting a single, tax-free lump-sum payment. Interest will accrue on this and will be paid when your home is sold. Or you can choose an amount to borrow against your home, take a lump sum, then draw down more funds in stages.

Before you choose your equity release plan, it’s important to think about how you want to use your payments as that might affect the way you choose to receive them. People use equity release funds in different ways, but here's a few of the possible options.

Paying off an outstanding mortgage or other debts

You might think that you need to own your home outright to get an equity release mortgage. In fact, a lifetime mortgage can be used to pay off an outstanding repayment or interest-only mortgage. This can make life easier in retirement, as it means you won’t have regular mortgage repayments to meet. Likewise, you can also use equity release to pay off outstanding loans or credit cards, which could make it easier to manage on your pension. But you should try to avoid these debts building up again where possible.

Because there are pros and cons to using equity release to pay off your debts, it’s a good idea to talk to our equity release partner Responsible Equity Release. They’ll be able to assess whether it’s in your best interests to do this.

Giving an early inheritance

Using equity release may reduce the amount you have to leave your loved ones when you die. But it’s also a way of giving an early inheritance, so you get to see your loved ones enjoying what you’ve given them - whether that’s by getting them on the property ladder, funding education, paying off debts or just treating them.

If you do decide to gift money from equity release, it could affect the inheritance tax payable on your estate. Read more in our guide to inheritance tax or contact HMRC for further information.

Going travelling

If you’ve dreamed of seeing the world, a lump sum from equity release could enable you to fulfil it.

Paying for home improvements

With a lifetime mortgage, you continue to own your home until it’s sold, so making improvements - like adding a new kitchen, conservatory or extension – could help you enjoy living there even more. Plus, it may add value to your home, making it easier to sell.

Adapting your home

As you get older, you may want to adapt your home to enable you to live in it independently for longer. For example, you might want a downstairs shower room, wider doorways or lower kitchen counter tops so you can remain self-sufficient.

Supplementing your income in retirement

You don’t have to spend money from equity release on something specific. It can simply be a way of adding to your pension income so that you’re more comfortable. This is where a drawdown plan might be useful.

Important things to know about equity release

Before you choose to release equity in your home, it’s important to understand how it will affect your financial situation, including the value of your estate and your entitlement to means-tested benefits.

Compare the Market’s equity release partner Responsible Equity Release will provide you with a personalised illustration, including the features of your plan and any risks to you. Find out more about equity release.

We’ve partnered with Responsible Equity Release to offer lifetime mortgages approved by the Equity Release Council.

Find out more

Sajni Shah - Consumer expert on utilities and money

Sajni is passionate about building products, allowing Compare the Market to help you make great financial decisions. She keeps track of the latest trends and evolving markets to find new ways to help you save money.

Learn more about Sajni

Considering an equity release mortgage? Find out more