What is the release of capital from 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. Equity Release Allows Homeowners Aged 55 and Older to Free Up Tax-Free Money from Their Home Value.

How much 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. 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 house 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. No need to move and you’ll still own your home. With the release of capital 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.

When it comes to your home, your equity is your market value, minus any debt you have insured against it. Releasing capital may not be your only option when it comes to unlocking some of the value of your property. For a couple requesting a capital release, the plan ends when the second person dies or when both partners receive long-term care on a permanent basis. Releasing capital is a big financial commitment, so it’s very important to understand what it would mean for you and your family.

Only by considering all the available options will you know that capital release is best for your circumstances. The Equity Release Council, which is the industry’s trade body, insists that all lifetime mortgages include a “non-negative capital guarantee”. Before identifying the correct equity release product, the advisor will also help you consider alternatives such as downsizing, remortgaging to a standard mortgage product, or a mortgage that only has interest for retirement. However, whether you are using a lifetime mortgage or a home reversal plan, you will likely be asked to use the equity you release to pay your mortgage.

If you are 55 or older and you fully own your home or have any outstanding mortgages, you can use an equity release scheme to unlock some of the equity accumulated in it over the years. Consult first with an independent financial advisor or mortgage broker specializing in capital release. The main disadvantage of freeing up equity is that it doesn’t pay you the full market value of your home. Your financial advisor will help you select the right amount to release based on your age and the value of your home.

So, how much you ultimately pay to free up capital in this way depends on home price growth, and if house prices soar it could end up being incredibly expensive. 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. Lifetime mortgages, a type of capital release, have evolved to become a flexible and secure way to access your property’s wealth. .

Claude Owen

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