Are you getting ready to stop working and retire, or you may have already retired, but you are concerned about how you can repay debt in retirement?

Many people who retire still have money they owe on credit cards or mortgages. This means they have to make monthly payments on top of their other household bills, which can be difficult. 

Having debt like this can put a strain on your savings when you retire and can be hard to pay off. Even if you’ve made a good plan for your retirement, existing debt can cause problems as it’s common for income to decrease and the amount you are paying to service your loans suddenly becomes a much bigger percentage of your net income. This can make it harder to handle your monthly payments and do all the things you want to do in later life. It can be a challenge to find enough money for everything. 

Can you use Equity Release to pay off existing debt? 

If you are over 55 years old, you might want to consider using Equity Release to help you with this. There’s no minimum or maximum amount of debt you need to have to consider Equity Release. But it’s more likely to be suitable if you have debts that you can’t afford to pay off using the money you regularly receive, such as a pension. 

With Equity Release, you can release some money from your home and use it to pay off your mortgage, credit card balances, car finance payments, or other loans.

Freeing up your income

Lifetime mortgages, don’t require you to make monthly repayments. Instead, the loan and the rolled up interest are paid back when the last remaining applicant dies or goes into long-term care. By using this type of plan to pay off your debts, you won’t have to make monthly repayments anymore and can have more money for your day-to-day expenses. 

All lifetime mortgage plans allow you to make repayments into the plan, so you can, if you wish, have an even greater degree of control over how you manage your debt. You may choose, to make comfortable monthly, or ad hoc, repayments, or no repayments at all. It is up to you. 

Should you use Equity Release to pay off your debt? 

If you’re a homeowner who is 55 or older, Equity Release could be a good option for you to pay off different kinds of debt. But it’s not right for everyone, and exchanging unsecured debt such as that on a credit card for secured debt on your property will nearly always work out more expensive in the long run. If the outstanding balance is at a level where it is unlikely that you could make more than the required minimum monthly payments, then clearing the debt this way might improve your day to day budget, even if it is ultimately more expensive.

If your debt situation is at a level where you cannot see a way forward, then your first step should be to contact one of the many debt charities who might be able to guide you out of your situation.

To make the best decision, it’s important to talk to a qualified and experienced advisor. They will explain the advantages and disadvantages of Equity Release and help you understand if it’s the right choice for you. They will also give you other options to consider, including when appropriate, contacting debt charities. So, don’t forget to get advice before making a decision. 

Here are a few things to think about:

1. The Financial Conduct Authority says you need to get advice from a qualified advisor before using Equity Release to get money from your home. 
   
   
2. A lifetime mortgage is a loan that’s secured by your home. It means the value of your estate will go down, and it might affect the benefits you can get from the government based on your income. 
   
   
3. All Equity Release plans have to meet certain standards set by the Equity Release Council. They also come with protections, like the guarantee that you, or your beneficiaries, won’t ever owe more than the value of your home. 
   
   
4. Before getting a loan against your home, you should always think carefully and consider if it’s the right thing to do.