Equity release plans allow you to take money from the capital accumulated on your property. They are aimed at older homeowners who would have difficulty taking out a regular mortgage and who are likely to have little or no income to make regular payments. Capital release refers to a range of products that allow you to access capital (cash) immobilized in your home if it is older. You can accept the money you release as a lump sum or, in several smaller amounts, or as a combination of both.
A capital release provider will provide you with a lump sum or income in exchange for a portion of the value of your home. This is achieved through a type of mortgage or by selling that part of your home on the condition that you can continue to live there as long as you want. Releasing equity unlocks the equity in your home as a tax-free lump sum. There's no need to move and you'll still own your home.
With the capital release you don't have to make monthly payments, unless you decide to do so. It is usually paid when the last borrower goes into long-term care or dies. The capital release allows homeowners 55 and older to free up tax-free money from the value of their home. The amount you can release depends on your age and the value of your home.
Depending on the capital release product you choose, you can claim your money as a large lump sum or as a series of smaller lump sums. Continue reading below for more tips and advice to avoid any potential horror stories about releasing capital. You won't have to pay the money you returned until the last surviving borrower dies or moves out of the home for long-term care. Your lawyer will then give you the money as agreed with your lender, for example, as a lump sum or the first smallest sum in a series.
The principal release loan plus interest is due after homeowners die or enter long-term care. If you have paid most or all of your existing mortgage, you may want to consider a capital release plan. Many lifetime mortgage lenders choose to become members of the industry's trade body, the Equity Release Council (ERC). All in all, freeing up capital may work well for some, but for others there may be better options available or they may choose an entirely different route to ease their financial worries.
Charges will vary from provider to provider and between advisors, but the total cost of setting up capital release can reach £3,000. As an additional security measure, ask your lawyer to review the agreement you have with the equity release company before signing it. Releasing capital can provide you with a large sum of money to spend and at the same time allow you to continue living in your home. There are numerous upfront costs involved in creating a capital release plan, so make sure you are clear about all of these costs before proceeding.
Any equity release company that has the Equity Release Council logo on its material must ensure that you can continue to live in your home until you die or move into a permanent care facility.