A capital release mortgage is a financial product that allows homeowners age 55 and older to access tax-free money from the value of their home. The amount of money that can be released is based on the homeowner's age and the value of their home. There are two main types of capital release mortgages: annuity mortgages and home reversal plans. An annuity mortgage for capital release only allows the homeowner to retain ownership of their property.
A lifetime mortgage involves taking out a loan that is secured against the home, and is generally repaid when the homeowner or the last remaining applicant dies or transitions to full-time care. A home reversal plan involves selling all or part of the home in exchange for funds. Before deciding what to do with the money released from a capital release mortgage, it's important to understand the powers that different creditors have. Priority creditors have the most power, while non-priority creditors have more limitations on what they can do to collect what you owe.
It's also important to consider how taking out a capital release mortgage may affect your right to benefits. The Equity Release Council (ERC) is a non-profit organization that represents different types of firms that participate in the release of capital. This includes lenders, qualified financial advisors, lawyers, and other industry professionals. It aims to provide information and protection if you are considering participating in a capital release plan.
All firms that advise and offer capital release plans and that are members of the ERC must follow the FCA rules on capital release, as well as additional rules and guidelines established by the ERC. If you're considering taking out a capital release mortgage, it's important to do your research and talk to an expert advisor from National Debtline. This will help ensure that freeing up capital is a realistic option for you, and that you understand all of your options.