In reality this option may only be open to the few who live in detached houses, live in the property hotspots of London and the South, or are prepared to accept the double whammy of moving to a smaller property far from friends and family.
In the current economic climate, people in or approaching retirement are looking to their properties to provide them with an increased income or a lump sum. The average person opting for equity release to help fund their retirement takes £46,000 from their property and whilst many people say they would prefer to downsize to free up their income, the truth is that they will probably need to release £56,000 once moving fees are taken into account. Around two thirds of homeowners will not be in a position to realise this amount of money by moving to a smaller house.
The figures show that if you are unwilling to move from your current region to another where the cost of living is cheaper, the only way you can expect to raise the necessary £50,000 by downsizing is if you have a detached house. The average detached house in the UK has a value of £290,208, this compares with £166,024 for a semi detached house, £150,307 for a terraced house, £159,292 for a flat and £192,373 for a bungalow. The only exception is for those who live in London and the South East where it is possible to earn £50,000 by moving from a semi detached house to a flat.
Ali Crossley, chief operating officer, Saga Personal Finance, commented: “You often hear people saying that downsizing their home is their pension but for many, unless they plan to live in a tent, the answer is, no it isn’t. The good news is that there are other options out there that enable you to remain in the home you love, close to friends and family, without the hassle and expense of moving.”
Equity release enables homeowners to use the value of their home to help fund their retirement without the requirement to move. The majority of people taking out equity release with Saga opt for a product with a draw down facility, which enables them to withdraw money as and when they need it, meaning they do not incur interest charges until they are ready to spend the money.
