We don’t like to think about what will happen when we are no longer here. However, when it comes to your equity release mortgage, it is usually going to be repaid once you pass away or if you enter care on a long-term basis. Therefore, this is something that you are going to need to consider carefully.
Equity release has made it possible for a lot of homeowners to live a better life while retired, help their children out with financial situations, or navigate through tricky monetary scenarios themselves. It works by releasing funds that are tied into their property. Monthly payments aren’t needed, which makes it an attractive solution. However, you are going to need to pay the money back somehow!
The money tends to be repaid when your home is sold, either when you enter into long-term care or pass away. If the product is taken out solely in your home, once you pass away the lender is going to typically enable the executor of your will up to one year to sell your property for a reasonable market price.
After the solicitor and estate agent’s fees have been paid, the rest is typically used to pay off the amount that you have borrowed. Any of the proceeds that are left can then be distributed to the beneficiaries you have outlined within your will.
Should there be enough money in your estate for the equity release mortgage to be paid off without the house being sold, the executor may decide to determine this instead.
If you want to take out a joint equity release plan with your partner, the repayment is only going to be due when the last homeowner on the deeds has entered long-term care or passed away.
After this, the repayment process works in the same manner that it would if you had taken out a solo equity release plan.
In terms of using the money from your equity release, you will be able to use it in any manner you please. Some people decide to use it to purchase a second home, for example, or as an early inheritance for their children. From home improvements to living costs; the choice is yours.
You simply need to make sure that when you take out an equity release, you pay off any traditional loans or mortgages that are secured on the property at the time.
Understanding what happens to equity release once you pass away is important, as you need to think about how it is going to impact your beneficiaries. This is one of many elements that need to be factored into your decision. The best thing to do is to use an equity release calculator so you can figure out whether equity release makes sense for you.