Equity Release to Pay for Home Improvements / Renovation
At Equity Release Warehouse, we believe that using equity release to pay for home improvements/renovation work is the way forward.
If you are considering undergoing some home improvements across your property, then you might be trying to work out the best way to fund this.
Many people would argue that in order to make any home improvements then you should always be using your savings to do so. At the end of the day, if you don’t have the savings to pay for it, can you really afford it?
However, not everyone is in a position to pay for their home improvements with savings. As a result of this, many people turn to using credit cards and taking out loans to pay for home improvements. Alternatively, taking out an equity release loan could leave you better off in the short term.
If you would like more information on how to use equity release to pay for home improvements/renovations, then speak to our team at Equity Release Warehouse for more information.
What is equity release?
Equity release is a type of mortgage that allows people aged over 55 years old the chance to gain access to the equity that is currently tied up in their home.
The equity in your home includes the monthly mortgage repayments you have already made and the initial deposit of your house. If your house has increased in value since you bought it then this is also included as equity.
When someone takes out an equity release plan in the UK, they do not have to make any repayments until after they die or move into a care home, in which case their house is sold and used to pay off the remainder of the equity release loan.
Whilst you do not have to make any regular payments, you will be charged interest on your equity release loan which will turn into compound interest if you let it build up. For this reason, many people choose to pay off the interest on their loan as they go, whilst they are still alive.
If you choose to ignore your interest and allow it to compound each month, then the amount of money you leave your loved ones in inheritance through your property will be reduced.
Once you move into a care home or pass away, your next of kin will be responsible for selling your house and using that money to pay off the equity release loan. Anything that is left over after the sale of the house will be given to your loved ones and next of kin as an inheritance.
In order to qualify for an equity release plan in the UK, then you need to be aged at least 55 or over, own your own property in the UK and this property needs to be worth at least £70,000.
This property must also be your main residence, meaning that you spend the majority of your time there throughout the year [1].
You also need to have paid off a big chunk of your mortgage already. If you have not, then you need to use your equity release money to pay off the last of your pre-existing mortgage [1].
The great thing about equity release in the UK is that you are able to spend the money however you want to, as there are very few restrictions.
Many people choose to spend their money on treating themselves to holidays or new cars. However, other people choose to give their inheritance to loved ones to help with University fees or house deposits [1].
However, equity release plans are extremely popular when it comes to people using their equity release money to pay for home improvements.
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Choosing equity release to pay for home improvements/renovation work
The great thing about equity release is that you are able to use that money on home improvements, which will increase the value of your property and therefore will also increase how much equity you are able to leave your loved ones.
There are a number of different equity release products across the industry, and some products are specifically useful when it comes to using that money to fund home improvements.
What are the disadvantages of equity release?
Whilst there are many advantages to equity release in the UK, there are also a number of disadvantages to equity release, depending on your current circumstance.
The main disadvantage to equity release is that you are potentially reducing the amount of money you are able to leave your next of kin in inheritance. This will most likely happen if you choose to ignore the interest on your loan and allow it to build into a compound interest [2].
The other disadvantage to equity release is that your interest rates will be higher than they are with traditional mortgages, so you should expect to see the interest and your loan amount increase quicker with equity release plans.
Another disadvantage to equity release is that if you opt for a home reversion plan, then you will have to sell a percentage of your property to the lender in return for the equity in your home [2].
In addition to this, you will have to sell a percentage of your home to the chosen lender for significantly less than market value. This will also mean that when it comes to selling your home after you pass away, your next of kin won’t get as much as they might be hoping for [2].
If you are considering using equity release to pay for home improvements/renovations, then speak to a member of the Equity Release Warehouse team for more information and advice.
Please call our 24-Hour Helpline: 0330 058 1579
Equity release to pay for home improvements/renovation work – What home improvements can you make?
When it comes to using equity release to pay for home improvements/renovation work, then there are a number of things you can spend your money on to improve your home and hopefully increase the value of your property.
As you get older, your home becomes an incredibly important place for you. In your retirement, you will find yourself spending more time than ever at home with your family, which is why it is important that your home is comfortable and suitable for you currently and in the future as well.
For this reason, you might choose to extend your house, fit a stairlift, create better access in and out of the property, create more of a wet room or level the garden to make it more accessible and easy for you to tend to.
If you have lived in the same house for a number of years then it might be nice to undergo some home improvements to make a change and a fresh start.
Below is a list of some of the most popular home improvements people make across the UK [3].
1. Rear Extensions
Rear extensions are by far the most popular way of improving your home and creating more space. This is mainly because small rear extensions do not require planning permissions as long as it is only small and 50% of the work using the original property.
Rear extensions take anywhere between 2 – 6 months depending on the size of your property and extension. They can also vary a lot in cost.
Rear extensions are popular for retirees who think that they might need more space in their home, particularly to the kitchen or dining area which usually sits at the back of the house.
2. Side extensions
Side extensions are also very popular and easy to do if you already have space to the side of the property. Extending sideways can significantly increase the size of a property significantly. Again, these can take a few months to do and vary a lot depending on the size and complexity of your extension.
3. Wrap-around extensions
Wrap-around extensions are also a great way of increasing the value of your property. They will change your property dramatically and will add a considerable amount of living space to your property.
You will however require planning permission and will need anywhere between £20,000 and £50,000 to do this type of home improvement and extension.
4. Double-storey extensions
Double-storey extensions are a great option for anyone aged over 55 who might need space downstairs and upstairs for a growing family. For example, if you have grandchildren who come to stay over frequently then you might decide you need an extra bedroom.
The main advantage of a double extension is that you get double the space than with a side or single-storey extension but do not have to pay double the cost.
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5. Accessibility of home improvements
Alternatively, you might decide that you want to improve the accessibility of your property. This could include things like stairlifts, handle rails, a wet room, a ramp or evening out the garden to make it more accessible for you or others.
It is important to think long-term when it comes to home improvements, as you should try to avoid making more work for yourself in the future.
For example, if you are considering an extension then you should be bearing in mind its accessibility for future selves. For this reason, you might choose to add in ramps instead of stairs or avoid creating too much space so that cleaning becomes unmanageable.
6. Why home improvements are always a good idea
Home improvements are always a good idea, and using equity release to pay for home improvements/renovation work is a great way of funding your home improvements.
There are a number of benefits when it comes to home improvements, some of which are listed and explained further below.
7. You are future-proofing your home for you and your family
One of the biggest benefits when it comes to home improvements is that you will be future-proofing your home for your future selves. This might mean that you choose to modify your home in certain ways which means that you will be comfortable living there until you pass away or move into a care home.
Usually, this involves things like adding a stairlift, creating a wet room or changing stairs for ramps.
It is important to bear in mind your future health when thinking about home improvements, as it is important to spend this money in the right way. After all, once it’s gone it is gone.
However, it is important to remember that if you are considering using equity release to pay for home improvements/renovation work then you might be eligible to qualify for some help when it comes to the costs. For example, Citizens Advice might be able to look into council-funded help for you.
8. You will most likely increase the value of your home
By spending your equity release to pay for home improvements/renovation work, then you will most likely be increasing the value of your property.
This is particularly true if you choose to spend your equity release money on side, rear or multi-story extensions or any other cosmic work such as a new kitchen or new bathroom.
If your property is pebble-dashed, then you might choose to render your house which is also known to increase the value of your property significantly.
If you want to use equity release to pay for home improvements/renovation work and are hoping to increase the value of your property by doing so, then you should consider putting an electric vehicle charging port on your driveway. This will increase the value of your property significantly.
9. Increasing the amount of inheritance left to your loved ones
Finally, using your equity release to pay for home improvements/renovation work will increase the amount of money you end up leaving your loved ones.
This is because by doing so, you will be increasing the value of your property and therefore the amount of money left over in inheritance once your next of kin sell your house.
If you would like more information on the benefits of equity release to pay for home improvements/renovation work, then speak to a member of the team at Equity Release Warehouse.
Please call our 24-Hour Helpline: 0330 058 1579
Is Equity Release the best way to pay for home improvements?
There are lots of different ways people fund their home improvements. Whilst some people believe that you should only improve your home if you can afford to pay out of your savings, for a lot of people this simply is not an option.
In fact, more people than ever are using equity release to pay for home improvements/renovation work.
This is because for most people aged over 55 in the UK, their main focus entering retirement is their house, and they also have a lot of equity tied up in their property. Therefore, using equity release to pay for home improvements/renovation work is the most obvious solution.
By using equity release to pay for home improvements/renovation work you will also be increasing the value of your home and the amount of inheritance you are able to leave your loved ones.
However, if equity release is not for you then the only other options are home improvement loans and credit cards, which could have high-interest rates.
Why credit cards are not good for funding home improvements
Lots of people tend to consider using credit cards when it comes to funding their home improvements. However, depending on how much your home renovation is set to cost, this might not always be a wise decision.
Home renovations can cost anywhere between just a couple of hundred pounds to tens of thousands. If you are thinking of spending a significant amount of money on your home renovation, then taking out a credit card could leave you with a significant amount of interest to pay on your credit card.
In addition to this, you must ensure that you are able to pay off the minimum payment each month, whereas with an equity release plan, there are no mandatory monthly repayments.
If you do want to consider using a credit card for your home improvements, then you should try to consider a credit card with a long 0% APR period which will allow you to pay off a significant amount of your loan before you are charged any significant interest.
Please call our 24-Hour Helpline: 0330 058 1579
Things to consider when using equity release to pay for home improvements/renovation work
If you are considering using equity release to pay for home improvements/renovation work, then there are a number of things you should try to bear in mind when making your decision.
1. The value of your home
How much equity you are able to release from your home will depend on the current value of your home. Before being offered an equity release plan, someone will go to your house to value it.
This means that they will look at your home and try to establish how much it is now worth. They will look for any damage, so it is important to make sure that your home is in tip-top condition before applying for an equity release loan.
2. Your age
Your age is also a huge factor when it comes to determining how much equity you can release from your home. You need to be aged at least 55 years old in order to qualify for equity release and more lenders will lend to you the older you get.
3. Your savings
You will also need to take into account your savings when it comes to using equity release to pay for home improvements/renovation work. If you can pay for your home renovation using your savings then this might feel like the best option.
However, remember that you might need to dip into these savings in the future for things like health care. If you would like more information on the costs of healthcare, then visit our page on ‘How much could your care needs really cost you in later life?’
4. Your income
When applying for equity release, the lender will also look at your current income and employment status. They will also look at your previous and current credit history and whether or not you currently have any debt.
They will also look at whether you have always been able to pay your pre-existing mortgage on time, and will also want to know your pension situation.
Please call our 24-Hour Helpline: 0330 058 1579
How to reduce your house renovation costs
There is no hiding the fact that home renovations can be incredibly expensive, and in some cases, you might not be able to release as much money as you need to cover these costs.
That is why it is always important to try to reduce your home renovation costs where you can. There are a load of different ways you can keep an eye on how much you cost and reduce how much you end up spending.
For example, it’s always a good idea to set yourself a budget and limit at the very start. You should also create a spending tracker spreadsheet so you know exactly how much you have spent to date.
It is always important to allow a bit of contingency in your budget, just in case things go wrong or cost more money than you originally thought and budgeted for. Most people add at least 10% on their budget just for contingency.
It is also a great idea to shop around for the best quotes in your area. Whilst it might be quickest and easiest to go with the first person you talk to, you should aim to get at least three quotes from different contractors or builders to see who is the cheapest and most reliable before making your final decision.
If you are planning on carrying out any of the work yourself, then this is a great way of reducing costs. You should also try to find second-hand tools or furniture where you can as this will save you a considerable amount of money.
Please call our 24-Hour Helpline: 0330 058 1579
Alternative ways to pay for home improvements
If using equity release to pay for home improvements/renovation work simply is not for you, then there are a number of different ways that you can pay for your home improvements.
For example, you could choose to use your savings to fund your home improvements. Whilst this is a great option for those who have savings, not everyone is in a position to do so. You might also want to think about keeping your savings to pay for things in the future such as medical costs.
Lots of people choose to use credit cards to fund their home improvements. However, this does mean that they have to pay potentially increasing interest rates, whereas with an equity release plan their interest rates are fixed.
If credit cards and equity release are not for you, then you could consider a home improvement loan. These include both unsecured and secured loans which can only be used for home improvements. You can also choose to take out a personal loan, although these will only be made available to you if you benefit from a good credit score.
If you are worried about which lender to choose, then make sure that your lender is monitored and regulated by the Financial Conduct Authority.
Please call our 24-Hour Helpline: 0330 058 1579
Get in touch with Equity Release Warehouse
If you are considering using equity release to pay for home improvements/renovation work, then you should get in touch with the team at Equity Release Warehouse.
Our team will use their expertise in all things equity release to find the very best deals and products for you and your current situation.
We will use our equity release calculator to work out how much equity you can release from your home depending on your age, current state of health and the value of your property.
If you would like to know how much money you can release from your home, then give us a call at 0330 058 1579 or by visiting our website at www.equityreleasewarehouse.com.
References
[1] https://www.equityreleasecouncil.com/what-is-equity-release/
[2] https://www.unbiased.co.uk/life/homes-property/is-equity-release-safe-the-pros-and-cons
