House prices in the UK have been riding high for a number of years, meaning many homeowners are sitting on large amounts of equity in their home.
According to the latest figures, since January 2010 total pensioner property wealth has increased by around 20% or £152 billion which is worth around £37,160 on average for every homeowner.
Homeowners over the age of 65 now own property wealth of £917.1 billion.
So how can it help you and what’s the best way to make the most of these strong property prices? We reveal five ways you can make the market work in your favour:
1. Pay less on your mortgage
If your mortgage deal is about to expire, or you are paying the standard variable rate – to which all deals revert to once a fixed period is over, you should be looking for another deal anyway, since mortgage rates are super low at the moment and so you should be able to beat your existing rate with a much cheaper one.
But with better property values, the lower your “loan-to-value” (LTV) figure is likely to be. More importantly, the lower your LTV, the cheaper your mortgage will be and the more choice of deals you will have. Speak to a fee-free broker who can calculate the best value deal.
Find out more about getting a mortgage deal after you turn 50.
Moving to a smaller home is becoming ever popular with couples who find themselves living in a huge family home which can be expensive and time consuming to run.
A home can also represent a large chunk of your assets, and so for some it makes sense to release some of the equity in a property to boost income either before or after retiring, by downsizing.
One fifth of the soon-to-be retired population is considering moving to a smaller property, according to Saga research. Get a valuation of your own home and see what else is on the market that suits what you need and your budget.
How much is your home worth?
3. Consider equity release
Equity release companies allow the over-55s to borrow against the value of their home, but the loan is only paid back when the house is sold when the owners move into care, or pass away.
The amount of money being released from property is at record highs thanks to healthy house prices. Official figures from the Equity Release Council revealed that a total of £393.9million was lent over the first three months of the year, the highest lending figure on record for the first quarter of a year.
The money can be used either to boost a pension pot, fund home improvements or to lend or gift money to children or family members. Often, it will help them climb the property ladder since prices are beyond the reach of many.
What do people use equity release for?
4. Borrow more on your mortgage
If you have a small mortgage left to pay, your lender might agree to lend you extra cash.
You will need to go through the affordability calculations and some might be tricky depending on your age. Most mortgage lenders will not approve loans that stretch beyond the age of 70 or 75, when income is expected to fall. Many will not go beyond 65.
A broker will be able to help you find a flexible lender. This is usually a cheaper option than taking out a loan but you should explore the costs and implications thoroughly before taking any action.
Are you sitting on a mortgage time bomb?
5. Rent a room
If you don’t want to move, and your property is large enough then another option is to rent a room out to a lodger who cannot afford their own property.
Under the government’s Rent a Room scheme, it is possible to earn up to £7,500 a year tax-free from letting a spare room or your home.
For more tips and useful information, browse our money articles.