Ex-police officer Noel Wright and his wife Suzanne are “living the dream” after selling their home and fulfilling their lifetime ambition of moving to Cornwall. Many more would love to do the same but money is often an obstacle.
The over 50s face having their retirement savings “eaten up” by debt as many will fail to clear their mortgages, credit cards, overdrafts and other borrowings. They are set to owe £62 billion in total after they stop working.
The cost of living crisis will make it even harder to pay them down, said Matthew Ellis, head of lifetime mortgage specialists OneFamily Advice, which carried out the research.
“Carrying debt into later life can seriously eat into a pension and people may need to work longer to pay it off.”
One in three homeowners are considering taking out an equity release scheme to raise the cash they need to get debt free.
The over 50s have high levels of home ownership and many have benefited from decades of property market growth, Ellis said. “Equity release can help pay off debts without having to downsize and leave a much-loved home.”
It involves taking out a “lifetime mortgage” on your home, where you do not have to make any debt repayments while alive.
Instead, the interest rolls up with the total debt cleared from the proceeds of your property sale after you and any partner either die or go into care.
Noel, 65, and Suzanne, 66, contacted OneFamily Adviser to ask whether it was possible to repay the existing borrowing on their Suffolk home and release enough funds to allow them to relocate to a small Cornish village.
The answer was yes and they are now happily living in a three-bedroom semi-detached home close to the Cornish coast and are already part of the local community.
Noel said: “I’ve lived a full-on life, so when I retired I just needed to get away from it all. Cornwall offers that, it’s so beautiful.”
He said the coastal scenery is “breath-taking”. “We’re just five minutes from the sea and have 180-degree coastal views from our home.”
Suzanne said it is a bit like being on holiday but they do not have to travel six hours to get here. “We’re so lucky.”
Equity release can change lives but it isn’t right for everybody, Ellis said. “Speaking to a specialist adviser should always be the first step in understanding whether it can help.”
This is only available for homeowners aged 55 and over, although the sums work better as you get older, as those in their 60s and 70s or later can raise the most cash.
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Equity release is regulated by the Financial Conduct Authority, and members of industry body the Equity Release Council follow a strict code of conduct.
They must offer a no-negative guarantee, which ensures that customers and their descendants can never owe more than the home is worth.
Falling house prices could reduce the amount owners can borrow while rising interest rates means the debt will rise at a faster rate (although most customers take out a fixed rate lifetime mortgage as protection).
Equity release will eat into any inheritance, customers will benefit from any future increase in house prices and can pass on surplus wealth once the debt is cleared.
Anyone struggling with debt should first consider other options, for example, returning to work, claiming overlooked state benefits, getting help from family members or downsizing.
Downsizing could free up equity and cut energy and council tax bills, but it can be costly, with estate agent fees, removals, and stamp duty on any new property to consider.
Taking out an equity release scheme is a big step so talk to loved ones, as their inheritances will be affected.
Take advice and compare products across the entire market to get the best possible deal.
Noel says it worked for them. “I’ve been coming here on holiday all my life and when I met Suzi I brought her down here. She fell in love with Cornwall immediately. Equity release worked for us.”