16 February 2015

Why your house cannot be your pension

Often someone will say - "my house is going to be my pension" - normally someone who hasn't thought about a pension soon enough!

But here's some reasons why that is unlikely to be the best thing:

1. You need somewhere to live, as well as having an income.
You can certainly down-size to a smaller house or rent, and then use the capital left to live off, but it's not always easy to live in a much smaller space, or in a cheaper area of the country.

2. You are reliant on house price movements
House prices have generally increased in recent years, but the falls of the 1980's still bring painful memories to many. And you don't want a fall just before you need to sell.

3. Equity Release plans are available, but they don't make financial sense too young
Since interest on a lifetime mortgage is added to the loan, you don't want to arrange it too soon. In fact the provider of the plan will limit the amount you can raise, the younger you are.

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