Are you getting ready to stop working and retire, but you are concerned about how you can repay debt in retirement? Many people who retire still have money they owe on credit cards or mortgages. This means they have to make monthly payments on top of their other household bills, which can be difficult.
Having a lot of debt like this can put a strain on your savings when you retire and can be hard to pay off. Even if you’ve made a good plan for your retirement, existing debt can cause problems. So, it’s a good idea to start your non-working life on a strong financial footing.
As you get older, it’s common for income to decrease. This can make it harder to handle your monthly payments and do all the things you want to do in later life. It can be a challenge to find enough money for everything.
Can you use Equity Release to pay off existing debt?
If you are over 55 years old, you might want to consider using Equity Release to help you with this. There’s no minimum or maximum amount of debt you need to have to consider Equity Release. But it’s more likely to be suitable if you have debts that you can’t afford to pay off using the money you regularly receive, such as a pension.
With Equity Release, you can release some money from your home and use it to pay off your debts. This can include things like paying off your mortgage, credit card balances, car finance payments, or other loans. It can help free up your regular income so that you don’t have to use it all to pay off your debts.
Freeing up your income
Lifetime Mortgages don’t require you to make monthly repayments. Instead, the loan and the rolled up interest are paid back when the last remaining applicant dies or goes into long-term care. By using this type of plan to pay off your debts, you won’t have to make monthly repayments anymore and can have more money for your day-to-day expenses.
Different people release different amounts of money from their homes through Equity Release, starting from £10,000. You don’t have to pay any tax on the money you release.
All Lifetime Mortgage plans allow you to make repayments into the plan, so you can, if you wish, have an even greater degree of control over how you manage your debt. You may choose, to make comfortable monthly, or ad hoc, repayments, or no repayments at all. It is up to you.
Should you use Equity Release to pay off your debt?
If you’re a homeowner who is 55 or older, Equity Release could be a good option for you to pay off different kinds of debt. But it’s not right for everyone.
To make the best decision, it’s important to talk to a qualified and experienced advisor. They will explain the advantages and disadvantages of Equity Release and help you understand if it’s the right choice for you. They will also give you other options to consider. So, don’t forget to get advice before making a decision.
Here are a few things to think about:
- The Financial Conduct Authority says you need to get advice from a qualified advisor before using Equity Release to get money from your home.
- A Lifetime Mortgage is a loan that is secured by your home. It means that the value of your estate will go down, and it might affect the benefits you can get from the government based on your income.
- All Equity Release plans have to meet certain standards set by the Equity Release Council. They also come with protections, like the guarantee that you, or your beneficiaries, won’t ever owe more than the value of your home.
- Before getting a loan against your home, you should always think carefully and consider if it is the right thing to do.
