The amount of tax-free cash you can release depends upon two main factors. The age of the youngest applicant and the value of the property, which is established by having a professional valuation carried out which is typically free. Some lenders may take into account underlying health issues when calculating how much is available.
Many modern plans also allow a large degree of flexibility in that the homeowner or their family can actually pay, in most cases, up to 10% of the initial sum borrowed to reduce the loan over time and preserve the remaining equity and protect any future growth in property value. If clients would prefer not to service the loan, the lender simply adds interest to the sum borrowed monthly or annually at a rate typically fixed for life.
Only when the surviving borrower either passes-on or moves into long term care does the loan become repayable. The beneficiaries of the estate can either sell the property and repay the loan from any proceeds or retain the property and repay the loan from other sources. Payments are not mandatory and are simply down to the choice of the customer.
The other main form of Equity Release is called Home Reversion plans. These involve selling part or all of your property to a lender and remaining in the property until death or going into long term care. At Equity Release Scotland we believe our customers should at all times retain ownership of their properties and so we decline to advise on these plans.