Boost your retirement income by £1000s using your property!

Your property is likely one of the most valuable assets you own.

While you may already have plans for what should happen to it after your death, it can also be a useful financial resource during your lifetime. Unlocking some of its value could offer a boost to your income, which can be particularly helpful in retirement.

Read on to find out how your property could add £1,000s to your annual retirement income.

Letting out property can create a new income stream

One of the simplest ways your property can boost your retirement income is to rent out part or all of it.

If you have a second home, you could consider renting out the entire property, either permanently or to holidaymakers.

Or, if you have a spare room, you could also rent it out, though it’s important to carefully consider whether sharing your home with someone outside of your family is viable for your retirement. Doing this means you may be able to benefit from the Rent a Room Scheme, which allows you to earn up to £7,500 a year tax-free.

The latest data from SpareRoom shows that the average monthly rent for a single room in the UK is £753, and £995 in London. Meanwhile, the Office for National Statistics reports that the average rent for a whole property in the UK is £1,354 a month, and £2,260 in London.

Of course, these are only average figures and many properties, especially holiday homes, can charge significantly more. Even so, the average rent could still add thousands to your income. This could potentially transform your lifestyle and give you greater freedom and flexibility in retirement, as well as help fund costs further down the line, such as social care.

Renting out a property can also be relatively hands-off if you use a property management company to handle the day-to-day work, though this wouldn’t be the case if you had a live-in tenant.

However, it’s also important to consider the possible financial implications of going through sustained periods with no tenants and ensure you factor this into your retirement plan.

A financial planner can help you explore different projections of how rental income could affect your retirement. They can show you the immediate difference it could make, as well as how it could help pay for potential future costs.

Downsizing could free up some of your property wealth

Once you reach retirement, your children will likely have moved out and you may find that your home is bigger than what you need. In this instance, downsizing could come with both practical and financial benefits.

Selling your home and buying a smaller, less expensive property can help free up substantial funds. You could then invest the money to generate extra income or set it aside as a financial cushion.

Downsizing can also help lower your everyday expenses, as smaller homes typically cost less to heat, power, and maintain. It could even give you the chance to move somewhere you’ve always dreamed of living but couldn’t previously afford.

Moreover, in terms of practicalities, smaller homes are often easier to manage, which is an increasingly valuable characteristic as you get older and household tasks feel more demanding.

However, it’s important to be realistic about the costs involved. Moving home comes with expenses such as estate agent and legal fees, and you may have to pay Stamp Duty, all of which can reduce the amount of money you're ultimately left with.

There’s also an emotional side to consider, as leaving your family home can be difficult and settling into a new space takes time.

A financial planner can help you decide if downsizing is a good option for you and explore just how much it could boost your retirement fund. If you do opt to downsize, they can also then advise you on how best to use the money you free up to support your goals.

Equity release allows you to access property wealth without moving

If you don’t want to leave your home or rent it out, you could explore equity release, which lets you unlock some of the wealth tied up in your property while continuing to live there.

Equity release allows you to borrow a lump sum secured against your home, with the loan and any accumulated interest repaid when the property is sold or after you pass away.

The main advantage is that it gives you access to funds without needing to sell your home outright. This can be particularly beneficial if your property has increased significantly in value.

However, it’s important to understand the potential downsides. Interest on lifetime mortgages compounds over time, meaning the amount owed can grow quickly and may eventually equal the value of your home. This can mean your beneficiaries receive a significantly smaller inheritance.

Moreover, releasing a lump sum increases your capital, which could affect your entitlement to means-tested benefits and may result in higher care costs later in life.

So, while equity release can provide flexibility and financial breathing room, it isn’t right for everyone, and it’s important to speak to a financial planner before choosing to pursue it.

Get in touch

If you want to use your property to boost your retirement income, a financial planner can help you decide which option best suits your circumstances and your wider retirement plan.

To speak to a financial planner, get in touch.

Email info@mlpwealth.co.uk or call us on 020 8296 1799.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

All information is correct at the time of writing and is subject to change in the future.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it.

Equity release will reduce the value of your estate and can affect your eligibility for means-tested benefits.