Releasing capital may be a good idea for seniors who want to earn some extra money during retirement.
Releasing capitalcan help you make improvements to your home, pay for care costs, help a loved one who is struggling financially, or pay other debts.
Releasing equitycan provide a useful way for older homeowners to access the equity accumulated on their property. It won't be right for everyone, but under the right circumstances, the capital release could be used to supplement your pension income or provide a lump sum, all while you live in your home.
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. It can be particularly useful to cover large expenses later in life, such as long-term care. However, there are downsides to accessing the value of your home in this way. The following guide explains the safety, disadvantages and pros and cons of capital release to help you decide if it is a good idea for you.
You can accept the money you release as a lump sum or, in several smaller amounts, or as a combination of both. All UK lifetime mortgage companies are regulated by the Financial Conduct Authority and, as members of the Equity Release Council, you are also protected by its strict rules and guidelines. At the same time, freeing up capital is not a good idea if you want to unlock a full lump sum to spend a leisurely expense without considering your financial future. Many of the mortgage and financial advisors listed on Unbiased provide high-quality independent advice on capital release.
You'll need to inform your equity release company so they can decide if your new home is of similar value. This may be available through advisors employed by a capital release provider or you may have to appoint your own independent financial advisor. This is compounded by the fact that most equity release agreements don't involve you making any repayments, so you don't pay any of the borrowed money until it's time to sell the property after you die or move into long-term care. Use an Accredited Provider Make sure that the supplier you use belongs to the Equity Release Council, so that you are protected from hazards such as negative capital.
So, to be sure that your capital release plan is safe, you just need to make sure that the company you choose is a member of the Equity Release Council. For most seniors, the most financially effective way to free up capital will be to move to a smaller property or to a cheaper part of the country. To make sure you understand exactly how capital release works, they stipulate that you can only apply for a loan if you receive professional financial advice and independent legal advice. 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.
Your financial advisor or mortgage advisor can help you decide if a capital release plan is appropriate or if you should consider other options, such as reducing your headcount. How the schemes work Capital release is a way for older people (the minimum age is usually 55, sometimes 60) to get money out of their property without having to move home.