An equity release mortgage is a way of unlocking some of the capital you own within your home, effectively pulling the capital out as a cash withdrawal.
If you own your home outright or have a low mortgage, the value of the home will continue to increase and with it, the capital within your home will increase and only realised if you sell it or, if you die the beneficiaries of your estate will realise the asset value; which also may be subject to inheritance tax. Equity release mortgages are often a viable option for those above aged 55 or in later life looking to realise some of the capital within their home that has increased over a number of years. This capital might be used to make a gift to your family, inheritance tax planning, adapt your home or even take a trip of a lifetime.
How do equity release mortgages work?
Traditionally equity release mortgages are taken over an open-ended mortgage term until you move into end of life care or upon death. During the mortgage term you do not have monthly payments as you may be retired and have less income; therefore without monthly payments the interest accrues over the duration of the mortgage and the mortgage is repaid upon disposal of the asset by your beneficiaries. The later in life an equity release mortgage is taken, the less interest is payable due to being closer to death – this age of the applicant also impacts the level of mortgage that can be taken against the properties current value.
There are some equity release products in the market where interest can be payable monthly, this will be subject to affordability checks on pension and retirement income. There are other lifetime mortgage products available in the market and will depend on your circumstances what is appropriate for you.
Speak to a Home Group Adviser and we can support you with the best course of action to support in releasing equity from your home.