The release of capital is a way to unlock the value of your property and convert it into cash. You can do this through a series of policies that allow you to access, or “release”, the capital (cash) immobilized in your home, if you are 55 or older. You don’t need to have fully paid your mortgage to do so. You can withdraw your home equity in several ways.
They include home equity loans, home equity lines of credit (HELOC), and cash-out refinances, each of which has benefits and drawbacks. 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. You can free up the equity in your home to deposit a deposit on another property, but you will usually need a significant amount of capital to do so.
If you want to rent the property, you will need a buy-for-rent mortgage. These mortgages tend to need a 25 percent deposit, often have interest only, and generally have higher interest rates and fees. It’s a good idea to get financial advice before taking this step. Capital release is only available to people who are of retirement age.
It involves freeing up money that is immobilized in your house. Money can be released as a lump sum or you can set up access to a flexible loan service. If you have at least 20 percent, the most common ways to take advantage of excess capital are through a cash-out refinance or a home equity loan. The lender will establish as a condition of releasing the capital that you return the credit card or loan upon completion.
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. Equity release is a form of lending designed for borrowers over 55 who want to take advantage of part of the capital they have in their property without having to sell more or less. However, when you switch to a new mortgage, you can also take advantage of the opportunity to release the equity in your home. Re-mortgaging to free up capital could be a way to access extra money, perhaps to renovate the house, pay off short-term debts or help with the education of your children.
This would make you eligible to remortgage a 70% LTV loan, however, if by freeing up capital the LTV jumps to 80%, you are likely to pay higher interest rates. Suppose you want to free £20,000 from a house worth £300,000, with an outstanding mortgage of £200,000. 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.
If you have an income, there is a good chance that you can consider freeing up the equity in your home. However, if you have more equity in your home and the equity release doesn’t have a significant impact on the LTV, your interest rate won’t necessarily increase. The release of capital may seem like a good option if you want some extra money and you don’t want to move home. However, people often re-mortgage to free up capital as a way to finance home improvements, for example, or to consolidate other debts.