Want more control over your retirement finances? Your home could hold the key
Sponsored by Royal London Equity Release Advisers
Sorting out your finances for a comfortable retirement could be a challenge.
At £12,547.60 per year from April 2026, the full state pension will only cover the basics for many. In addition, some may find that due to starting later in life or gaps in contributions, their private pension income falls short of what they had hoped.
The cost of living also looks set to rise once again, as world events threaten to push up energy bills and groceries.
Meanwhile, we are living longer. The latest life expectancy data from the Office for National Statistics suggests retirees typically live for around 20 years past retirement age, meaning private pensions and savings have to stretch further still.
It is natural that people in their fifties and sixties may be concerned about how they will afford to keep paying for life’s essentials, and still have enough left over to enjoy their old age.
For those that own their home, a lifetime mortgage could be part of the solution.
Tax-free cash: Equity release allows over-55s to access money tied up in their home
A lifetime mortgage is the most popular form of equity release. While it is not suitable for everyone, and should be carefully considered, equity release can be a useful tool for those who do not have large cash savings or investment pots, but do have money tied up in their property.
Sophie Walsh, head of equity release advice at Royal London Equity Release Advisers, says: ‘Equity release can give homeowners extra flexibility at a stage of life where it really matters.
‘For many of our clients, their wealth is locked up in the home. By releasing a portion of this as tax-free cash they are able to use this wealth as a means to help build greater financial resilience.’
Equity release works in a similar way to a normal mortgage, but is only available to UK homeowners aged 55 and over. It also has the crucial difference that monthly repayments are not required. The loan only needs to be paid off when the last homeowner dies or goes into long-term care, at which point the home is sold and the proceeds used to clear the debt.
‘It’s not about complicated strategies — it’s about helping people feel they’re making the most of what they’ve worked so hard to build’, Walsh says.
‘The clients who often benefit are those who have built up significant value in their home but don’t necessarily have large savings.’
A lifetime mortgage is a loan secured against your home. It will reduce the value of your estate and could affect your entitlement to means tested benefits.
Staying put: A lifetime mortgage offers an alternative to downsizing in older age
Customers use the funds for a whole range of different things in their retirement, but home renovations is often among the most popular motivations homeowners cite for using equity release.
This can enable them to stay in the home they love and adapt it for their future needs, rather than facing the upheaval of downsizing.
Wanting to pay off an existing mortgage or gain more financial freedom in retirement is another motive. If someone who wants to use equity release has not already paid off their mortgage, they must do this upfront using the funds they borrow.
‘Most clients we speak to are thinking about their families and their future,’ says Walsh. ‘The conversations usually start with a life moment, clearing an old mortgage, or simply helping to make a more comfortable retirement.
‘There’s often a real sense of wanting to enjoy the next chapter of life.’
Helping family and friends with a financial gift is another common reason to use a lifetime mortgage, with some seeking to help loved ones get on the property ladder themselves or simply provide a ‘living inheritance’ which they can see them enjoy. ‘They can give that helping hand at a point in life where it really counts,’ Walsh continues.
Expert advice: Speaking to an adviser is essential if you are considering equity release
Modern equity release plans also offer a range of options to suit different circumstances. For example, some plans allow homeowners to make voluntary repayments on an optional basis if they choose to reduce the interest owed. If they do not make any interest repayments, the interest adds up over time.
Protections for equity release customers have also been bolstered by the Equity Release Council’s six standards. These apply to all plans provided by its member lenders.
The standards include having your interest rate fixed for life, having the right to move home subject to lender approval, having a 'no negative equity guarantee' and being able to make voluntary, penalty-free repayments up to an agreed limit, subject to lending criteria.
Seeking expert advice is essential, to make sure borrowers are fully informed and can choose a plan which best suits their circumstances. It is also a good idea to involve family members in the discussion, as it is likely to affect their inheritance.
At a consultation with Royal London Equity Release Advisers, Walsh says: ‘Our role is to listen, understand what they’re hoping to achieve, and then help them explore whether equity release is the right route or whether another option might suit them better.’
Alternatives include downsizing, taking a retirement interest-only mortgage or taking a lodger to increase income.
