Equity release can give you a useful cash injection. This is when you release the value of your home, or another object with capital value, while still living there or using the object. Below, we explore how you can use this to help with home renovations.
Boosting the value of your home
You can use an equity release mortgage to boost the value of your home. The best way to do this is to apply for a lifetime mortgage equity release. This is where you borrow a lump sum that you eventually repay whenever the house is sold – usually when you die or move into long-term care. The amount you can borrow is usually between 18 per cent and 50 per cent of your property’s value. The older you are, the more equity you can release. You can use this financial boost to carry out home renovations and boost the value of the property when you eventually sell it.
Over 55?
Equity release has a set of rules depending on your age though. For a lifetime mortgage, the owners of a property must be over 55. Meanwhile, for a home reversion plan, the owners must be over 65. As such, renovating your home via an equity release is only an option that works for over 55s.
Pros
One of the main benefits is that when you begin your lifetime mortgage, you can receive your cash in one lump sum. This can give you the immediate capital to carry out any expensive renovations such as a new kitchen or an extension. What’s more, under this arrangement you’ll be able to stay in your home for the rest of your life and enjoy the benefits of your renovations. Plus, unlike a reversion plan, you retain full ownership of your house – you’ll benefit from any increase in value.
Cons
However, the interest accrued on your loan can build up over the years. With compound interest, you can find that you owe huge sums in interest after 10 years. If you try and avoid this by paying early, you’ll also have to pay an early payment charge.
If you want to carry out home renovations but don’t have the finances, an equity release mortgage can give you new flexibility. With careful renovations, you can even boost the value of your home over this time.