Many people over 55 years of age are cash poor but asset rich. They may not have a lot in the bank, but have considerable value in their family home, especially if the mortgage is paid off or nearly paid off.
One option for extra income is equity release which gives access to money tied up in the home. There are various schemes available for this. They can provide a regular income or a lump sum. Most equity release schemes mean that the home must be sold after the homeowner dies to pay back the provider. This reduces the amount of money that can be left to the family.
Equity can be released from a home and invested in property to generate an income. This could be property to rent, residential or commercial. If equity release does not provide all the funds for property purchases, the homeowner may be eligible for a buy to let mortgage or a commercial mortgage.
If investors are astute in the property type and location, they can expect good capital growth and rental yields. The property will be a valuable asset to leave to the investor’s family after they die.
Some older people use equity release to purchase cheap properties at auction for refurbishment and sale at a profit. Bridging loans can be used to fund the property purchase and construction work. If the property is sold quickly and the bridging loan repaid, the investor may not need to release equity in their home.