Right-sizing in Retirement—Purchasing property with equity release

Reader's Digest Editors

Whether you’re looking to upsize, downsize, or simply live in the home that better meets your ambitions in retirement, then a lifetime mortgage could help provide you the financial boost you need to afford the home of your dreams

Retirement is a time of change, and for many it could prompt a reassessment of what they need from their property. Conventional wisdom suggests that as we get older and our children fly the nest, the time has come to consider downsizing into a more practical, manageable property. Indeed, research in 2017 indicated that as many as 5.7million UK pensioners are considering downsizing in their retirement.[1]

For others however, the ambition could be to upsize their property. Investing in a larger property can provide them with more space to enjoy a comfortable retirement, or the room to welcome family and friends.

Others still, may want to enjoy a change of lifestyle in retirement. Moving to either the coast or the country can motivate a more active, healthier lifestyle, which is an important consideration for many.

However, property ambitions can be harder to realise in later life. Not only are mortgage providers less likely to lend the necessary capital, but increasing house prices can prove a stumbling block. Research by Halifax found that moving to the countryside for example is a pricey option: rural homes are on average 20% more expensive than those in urban areas.[2] For those looking to move later in life, one of the main challenges can be having the access to enough cash to make purchasing another property viable.

For those who are asset-rich but cash-poor, there is a way to use the value of the new property to realise your retirement ambitions. Using a lifetime mortgage, one of the most popular methods of equity release available today, UK over-55s are able to release a portion of the value of their property as tax-free cash. This can solve their potential property problems in a number of ways.

Become informed

A fortunate few will have sufficient equity in their first property to be able to afford to buy their next property either outright, or at extremely advantageous rates. This is frequently an option for those looking to downsize, which often involves moving into a smaller, less expensive house.

Others may be able to release equity from their new property to help bridge any potential shortfall between the cost of the house and their personal finances. This is often a solution for those looking to upsize, or move into more expensive properties. An additional benefit of lifetime mortgages is the peace of mind in knowing that you have access to a significant tax-free cash boost, without the need to make burdensome monthly payments, which can help free-up your finances to more fully enjoy your retirement. They also feature fixed rates of interest, meaning that you can receive accurate projections of the cost of your mortgage. As a lifetime mortgage will reduce the value of your estate and may affect your entitlement to means tested state benefits, it is recommended that you request a personalised illustration, which will explain the features and risks to you.

Once your lifetime mortgage has been used to help clear any debts secured against your home, such as an existing mortgage, the remainder of the cash is yours to spend as you wish. This means that once you have moved into your new house, you can invest in making it your dream home. At Reader’s Digest Equity Release we will only offer our customers a Lifetime Mortgage from a provider approved by the Equity Release Council, meaning that our customers can enjoy all the in-built safeguards this provides. Both you and your partner will retain full ownership of your new home for life, or until you enter long term care, and that you will never pass on lifetime mortgage debt to your loved ones.

There is bound to be a Lifetime Mortgage option that suits your personal ambitions. Whether you’re upsizing or downsizing, equity release with a lifetime mortgage could help you find your dream home in retirement.

Whether you're curious as to how much you can release, or you want to take the initial steps towards releasing equity, our handy calculator will give you the information you require.

Or you can contact us on 0800 029 1233 to discuss your needs with a view to arranging a no obligation face-to-face home visit with one of our financial advisers.

[1] Thisismoney.co.uk, ‘Shocking cost of downsizing revealed: Older homeowners stand to lose £29k moving to a smaller home (and stamp duty’s only half of it!)’, 12/08/17

[2] Halifax Press Release, ‘Country life costs Brits over £44,000’, 30/09/17

Reader's Digest Equity Release is a trading style of Responsible Life Limited. Responsible Life Limited is authorised and regulated by the Financial Conduct Authority and is entered on the Financial Services Register (http://www.fsa.gov.uk/register/home.do) under reference 610205. In using this website I give express consent to Responsible Life Limited to contact me on the details provided from time to time. Calls may be recorded for training and quality purposes. This is a Lifetime mortgage which may reduce the value of your estate and may affect your entitlement to state benefits. To understand the features and risks ask for a personalised illustration. Any information contained herein is a personal opinion of the author and should not be considered to be advice of any kind. Inheritance Tax planning is not regulated by the FCA. Think carefully before securing other debts against your home. By consolidating your debts into a mortgage you may be required to pay more over the entire term than you would with your existing debt. Only if you choose to proceed and your case completes will Responsible Life Limited charge an advice fee, currently not exceeding £1,295. Our adviser will talk through the setting up costs of a lifetime mortgage before you make any decision to proceed.