When you die, your home will usually be sold by the executor of your estate and the proceeds will be used to pay the capital release plan (as well as to pay agent and attorney fees). If there is still money left, it will be paid to the beneficiaries named in your will. When you die, your capital release plan is reimbursed. Your beneficiaries must inform their lender of equity release and, with a lifetime mortgage, they usually have 12 months after their death to repay their plan.
Usually, this happens through the sale of your property; however, it can be by any financial means. Once your capital release plan has been repaid, the surplus money will be part of your inheritance. When you die, your home will usually be sold. The money raised from the sale of your property will pay the real estate agent, the attorney's fees and the remaining money will be used to repay the equity release loan.
Once all these payments have been fulfilled, any remaining proceeds will go to your beneficiaries. The equity release gives you the option to borrow money from your property and continue to hold 100% of the property. Usually, the capital release plan must be paid within a 12-month period. Some farms decide to list the house for sale to get the money to pay the supplier.
Others choose to put the house up for rent, as this ensures that the provider receives a certain amount at the end of the month. However, if you are looking to sell the house, having tenants could cause some challenges. One point to keep in mind is that interest remains in the building during those 12 months. If the money cannot be repaid within 12 months, the provider discusses it with the beneficiary to create a new plan to be able to repay the money.
Ultimately, the provider can get the house back if the money is not returned. The release of capital can be very useful if you have no other source of income. However, they do affect your inheritance after your death, since you simply won't have a house to pass on. This means that your family can't inherit your house, which is something that neither you nor the family will want.
When you die and you have no surviving spouse or partner who also owns your home, the equity release loan will have to be repaid. The money comes out of your estate through the sale of the property. Once the property is sold, the equity release lender can request the money owed to him, but he cannot keep anything but his share. When you die, your home can be sold so that the capital release plan can be paid.
The sale will generally be arranged by the executor of the will, who will also be responsible for repaying the capital release plan, both the principal and the interest accrued. They will also be responsible for organizing services, such as real estate agents and lawyers, and will be required to pay for these services, using the proceeds from the sale of the house. By freeing up your own capital, you are effectively reducing the value of your property, potentially to a value below the IHT threshold of £325,000. Typically, executors will sell the property to redeem the capital release plan, but ultimately it depends on the equity how they settle the outstanding balance within the deadline.
If your equity release plan has this guarantee, your beneficiaries will not have to repay more than the value of your home, even if the debt exceeds the proceeds of a sale. Another key benefit of choosing equity release over other financial products is that it can reduce the amount of tax paid to HMRC when you die. The sooner you contract a capital release plan, the more likely it will cost, because interest will accrue over a longer period. The amount you return after using a capital release plan will depend on whether you used a home reversal plan or a lifetime mortgage.
Some people perceive that the “trap” of capital release is significant aggregate interest within some lifetime mortgages or significantly low offers on housing reversal plans. The surviving plan holder continues to live in their home and the capital release plan continues until they die or move to long-term care. If not, your spouse will have to sell the property to pay for capital releases once you have died. For lifetime mortgages that meet Equity Release Council standards, your equity will never owe more than the value of your properties.
After that, the repayment process will continue in the same way as with a capital release product in a single name. Some people decide to apply for a lump sum in the form of a capital release, so that they can financially help their loved ones while they are alive, rather than waiting to receive the inheritance when they die. The financial advisor will know if they qualify for additional benefits and how they can request what they are entitled to and will also ensure that any changes to the capital release plan do not affect their benefits. In addition to the fact that your beneficiaries will accept your death, they may not be familiar with how the capital release works or what liabilities they may have.
To understand all the characteristics and risks of a Capital Release plan, request a custom illustration. . .