Debt in retirement
According to a recent survey, only 28% of people currently planning to retire feel they have saved enough for a comfortable retirement. To add to this, 48% still owe money on credit cards, while 31% still have an outstanding mortgage, meaning they have regular monthly payments to meet on top of their household bills.*
Having large amounts of debt like this can severely strain your savings once you retire and can be difficult to pay off.
Even the best-laid retirement plans can be spoiled by existing debt. So it’s good to start your non-work life on a strong financial footing.
While incomes traditionally fall at this time of life, finding the funds to manage monthly payments, as well as doing all the things you want to in later life can be a struggle.
* Research conducted by Research Plus between 18 and 31 December 2019 among a sample of 1,000 people expecting to retire during 2020
Can you use equity release to pay off existing debt?
Nearly half of over 55s have been preparing their retirement finances by paying off debt using equity release.**
There is no minimum or maximum level of debt you need to have to look at equity release as an option. However, it’s more likely to be suitable for you if you have debts that you cannot afford to pay off using your regular income.
By releasing some of the funds from your home, you can use it to pay off debts such as an existing mortgage, balance on credit cards and loans, car finance payments or other loans.
Freeing up your income
With a lifetime mortgage, the most popular type of equity release, there are typically no monthly repayments to make, as the loan plus roll up interest, is repaid when the plan comes to an end.
By paying off your debt with this type of plan, it allows you to stop making monthly repayments on your existing debt and free up your day-to-day cash.
The amounts people release vary starting from £10,000 and there is no tax to pay on the money released.