The release of capital reduces the value of your estate and the amount that will go to the persons designated as beneficiaries in your will. Your wealth is everything you own, including money, property, possessions, and investments. With a housing reversal plan, the reversal company owns all or part of the shares in your home. Capital release refers to a range of products that allow you to access capital (cash) immobilized in your home if you are 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 mortgage involves a lender giving you cash in exchange for a portion of the proceeds from the sale of your property later. But unlike a traditional mortgage, which you pay within a certain period of time, a capital release loan is not settled until you leave your home. Capital release is a type of loan that allows older borrowers to access part of the money fixed in their property.
There are different types, such as a life mortgage or a home reversal plan. The amount you can borrow will depend on your age, the lender and the value of your property. The obvious advantage of freeing up capital is that it gives you money to spend now, rather than leaving you locked up in your house. The long rise in house prices in the UK means that a large proportion of homeowners' wealth sinks into their properties and is therefore inaccessible.
If the value of your home has increased over the years, freeing up capital allows you to get some of that money to supplement your retirement income, rather than leaving everything to your beneficiaries or to cover your long-term care costs. Equity release plans allow you to access the value of your property for more cash in retirement, but releasing capital is a costly and lifetime commitment. Equity release plans are available to those over 55 who own a qualifying property in the UK. A capital release provider will provide you with a lump sum or income in exchange for a portion of the value of your home.
If your lender is a member of the Equity Release Council, a lifetime mortgage must be transferable, meaning you can still move your home. If you have enough free money or other investments that will allow you to maintain your lifestyle or other spending goals in retirement, the capital release is less likely to be right for you. The money you pay your provider to cover the various administrative costs involved in freeing up your home equity. 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 to a permanent care facility.
There are different capital release plans that allow you to release this money, either by obtaining a secured loan against your home or by selling some or all of it. Continue reading below for more tips and advice to avoid any possible horror stories about releasing capital. 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. With the most popular form of equity release, the outstanding loan (plus interest if not paid) will be repaid when you sell your home, which usually happens when you die or move into a long-term care facility.
First of all, most lenders only allow you to contract a product through an independent advisor who will consider your circumstances and guide you on whether releasing capital is a good idea and which lender and product are right for you. We hope this glossary will shed light on the jargon you may encounter when considering your capital release options. The release of capital may seem like a good option if you want some extra money and you don't want to move home. The release of capital is a way to access part of the money immobilized in the value of your home if you are over 55 years old.