The capital release can be used to purchase a variety of properties, such as a vacation home, investment property, or rental investment. The net value of the home is the absolute value of the home you own, which is calculated by subtracting any debt linked to your property from the current value of the property. The released capital is tax-free, paid as a lump sum and is yours to spend however you want. Remortgaging a property to free up the capital that is used to help buy another property is a common method that homeowners use to increase their portfolio. Some purchase-to-rent lenders lend up to a maximum loan value of 85%, and affordability is based on the level of rental income the property can achieve.
Capital release refers to a range of products that allow you to access the capital (cash) fixed in your home if you are older. You can take the money you release as a lump sum or in several smaller amounts or as a combination of both. Since capital release is often available to people aged 55 and older, obtaining a second mortgage can be very difficult and expensive, so people are often recommended to buy the property directly to avoid additional costs or headaches in the future. The loan plus interest must be repaid to the lender that frees up capital; this is usually done by selling the house and your family keeps the remaining profits. A holiday home could be a big boost to your retirement and, in theory, there's no reason why you can't use the money you raise with a capital release plan to finance the purchase of a property, whether here in the United Kingdom or abroad. In essence, a capital release plan is a secured mortgage on a property; however, unlike a conventional mortgage, there are no monthly payments. The method you use to free up capital to purchase a second property will depend on the options available, which will be based on your personal circumstances.
An agent specializing in capital releases, such as Age Partnership Plus, can tell you what it entails and explore if it's the right solution for you. If you are thinking of purchasing a stock release product, you should seek financial advice from an independent financial advisor. The Equity Release Council (ERC) is a body that exists to ensure that lenders and advisors provide the highest possible standards to borrowers. The rules are slightly different with freeing up capital and buying for rent when it comes to the percentage you can release from your property. So, if you're seriously considering a home reversal or annuity mortgage plan, make sure it's one from a lender that's a member of the ERC (virtually all lenders with capital release are).
You still have the option of moving house in the future if you have a home equity loan on your home. There are several ways to free up the capital in your home to buy another property, depending on your age and finances. While freeing up capital is not a common option for homeowners who buy to rent, specialized plans may exist. You have the option of not making any repayments during the life of the plan, which is one of the main benefits of capital release.