In 2021, 7% of customers used equity release to go on a holiday of a lifetime.* Whether it’s walking on a warm sandy beach, a Spa Break with the Girls, family surfing and beach holiday or setting sail on a new cruise adventure. You will have an idea of your dream adventure. In this Retirement Solutions article we look at funding holidays when you are retired. It is important to note you have numerous options to raise funds, like downsizing, renting out rooms or using savings. Seek independent advice before making any decisions. Let’s look at How to Fund my Holiday plans in Retirement?
Holidays for Retirement
A poll revealed that 29% of pensioners are looking to travel the world in retirement and the majority would like to take three holidays a year if they had the choice.** Everyone’s idea of a dream holiday, as well as their dream destination is different but we all have one thing in common, and that is making memories in the places we aspire to visit most. Some of these amazing adventures may involve:
A Caribbean cruise – get ready to take a relaxing cruise exploring tropical island destinations such as Jamaica, Barbados, and St Lucia.
An African safari – if your passion is big cats and wild creatures then you could use the capital locked away in your home to fund the ultimate safari adventure
Ride the Rocky Mountaineer across Canada, Jade-green lakes, snow-dusted mountains and fish-hunting grizzlies make Canada a must-visit.
A city break in New York city walking down the bright lights of Times square, visiting local Broadway shows and witnessing the hustle on wall street.
Taste wine in Napa Valley – if you have always dreamed of enjoying a luxury holiday filled with food and great wine then few places can compare to California’s Napa Valley.
How could I fund my future plans?
One of the potential options for raising funds is Equity release. This allows homeowners over 55 with a property worth over £70,000 to release some of equity in the form of tax-free cash that has built up in their property over the years.
This is why it is always important to seek independent equity release advice, to ensure that the lifetime mortgage recommended for you is the most suitable for your circumstances.
Alternatives to Equity Release
There are several alternatives to consider:
Downsizing is one option, where you sell your current home and move to a smaller, less expensive property, freeing up cash in the process.
Renting out a room or property can provide a steady income stream.
If you’re of pension age, you might be able to take advantage of pension drawdowns or annuities.
Another option could be to take out a secured loan or mortgage, although this would require making regular repayments.
You can also look at government benefits or grants that may be available for certain individuals, particularly those with low incomes or specific needs.
Whatever you consider, it is important to carefully consider all options and seek professional advice before making any decision.
The Pros of Equity Release
Despite its historical reputation, equity release has evolved, and there are compelling reasons why retirees consider it:
Financial Freedom
Equity release provides a lump sum or regular income, allowing retirees to enjoy their retirement fully. It can fund home improvements, travel, or other lifestyle choices.
No Repayments During Lifetime
Unlike traditional mortgages, equity release doesn’t require monthly repayments. Borrowers can live in their homes without the stress of meeting regular payment deadlines.
Flexible Options
Equity release products offer flexibility. Borrowers can choose between lump sums, drawdown facilities, or a combination of both.
Ring-Fenced Guarantees
Many equity release providers offer “no negative equity guarantees.” This means that borrowers won’t owe more than the value of their property, even if interest accumulates.
Tax-Free Cash
The released equity is tax-free, making it an attractive option for those seeking additional income.
The Cons of Equity Release
Interest Accumulation
As mentioned earlier, compound interest can lead to substantial debt over time. Borrowers must understand the long-term implications.
Reduced Inheritance
Equity release reduces the value of the estate, potentially impacting beneficiaries’ inheritance.
High Fees
Equity release products come with fees, including arrangement fees, legal costs, and valuation fees. These can add up significantly.
Impact on Benefits
Means-tested benefits may be affected, so retirees should seek professional advice.
The story of Miss Johnson and her Brooklyn dream
A fantastic review from our customer Miss Johnson who used equity release to visit a family member.
“I first came across Retirement Solutions online. My adviser Paul was very nice, not pushy at all and explained everything very clearly. As the service from Paul was excellent and so helpful I went straight back to him a couple of years later when I wanted a further advance. I want to go to Brooklyn to see my niece and have a cash reserve as peace of mind too. Retirement Solutions went out of their way and nothing was too much trouble.”
How to enjoy your holiday home in retirement
- There is one less thing to worry about when you go on your holiday, you already have your accommodation sorted.
- There is an opportunity to get to know the local community and build new friendships and relationships.
- Holiday homes in holiday villages are filled with opportunities and activities to keep you and the family busy.
- You can choose to style your holiday home how you like, it is yours after all!
- You can choose your location
Escape away in your own holiday home
Many people dream of having a second home, in which they can escape to in the hot summer days or a home closer to family making visits easier. 3.4 million Brits (10% of UK homeowners) have a second home that is used as a holiday home. **** Whether it be a camper van or motorhome for amazing road trips, a private villa with a pool, or a cottage by the lakes, having a holiday home can give you years of enjoyment.
Important to note
- A lifetime mortgage is a loan secured against your home and subject to compound interest, meaning the amount you owe can grow quickly
- Equity release will reduce the value of your estate
- Equity release may leave you with limited or no property equity remaining
- Equity release may affect your entitlement to means-tested benefits
- Equity release will reduce your financial options in the future
Seek Independent Advice
If you are a retired persons contemplating fundraising from their property. You must recognise the significance of seeking independent advice. To help navigate this complex financial landscape effectively.
Whether considering downsizing, equity release, renting out property, or considering one of the other alternatives to equity release. Retired people like you must weigh the benefits and risks of each option in light of their individual circumstances and goals.
Independent advisers play a crucial role in providing retirees like you with the expertise, perspective, and guidance. Providing you with the balanced and unbiased information needed to help you make informed decisions, and help you secure your financial well-being in retirement.
By leveraging independent advice, you can confidently navigate the process of raising funds from your property. But there are no guarantees that you will be able to do so. Everything is subject to your personal circumstances.
