Once you retire the priorities in your life change. While come are content with spending their last days with their family around them, others plan to make that trip round the world they have been postponing far too long. Considering the present economic condition of the country fulfilling the dreams seems like a dream in itself. Many of the retirees are still bogged down by the debts they took long back and are still trying to pay them off.
Retirement means that you have to start drawing on your savings to pay for your daily needs and requirements. With the recent rise in the price of all the essential commodities, it is becoming next to impossible for many of the average retirees. On top of it all if they have a debt to pay off they find it really difficult to negotiate.
In the above scenario, releasing equity on the properties after retirement becomes a very lucrative option for the house owners. While it provides them a way to pay off the loans easily and effectively it also lets them spend their last years in peace.
According to a recent survey of the equity release market in the UK revealed that more and more people are option for the drawdown mortgage plans rather than the lifetime mortgages as they will be able to get small amounts of money at regular intervals. as a result, the average age of the consumers decreased by a year in 2007 than in 2006.
The retired people are unable to provide for their comfortable life even in their retirement. Therefore, they are turning more and more towards their most valuable asset, their home. About £1.4 billion was raised by releasing equity out of which £500 million was spent by around 12,000 house holders to pay off their debts and outstanding bills.
Equity release has become a very popular option for the retired in the United Kingdom especially because it provides the consumers with a tax free income to spend as they please. This is also a kind of loan against their home, but they will not have to pay the debt off in their lifetime. the providers will take over the house after the borrower has either died or has moved out permanently. The Equity Release Council changed its regulations and now the debt is not passed on to the beneficiaries even though they will get any remaining amount from the sale of the home after the loan is paid off.
About 40% of those who released equity used the amount to pay off their bills and debts and more than half used the money for home improvements. Even if the schemes seem so appealing, it is never advised to release equity blindly. One should always take an independent adviser’s opinion before taking the final decision.
This contribution has been made by Jonathan who writes on various financial issues on behalf of The Right Equity Release. Here, he talks about the change in the equity release market in the UK in the past few years