Never Heard of Capital Gains? Fear Not! We’ve Defined the Term Simply to Help You Understand. Discover All There Is to Know About Capital Gains and How They Relate to Equity Release.
You could be earning money right now and not even know it!
If you’re a homeowner, you’ll want to have the best knowledge on how to get the most out of your investment. In addition, there are so many financial and mortgage terms that it’s difficult to keep track of.
This is no different from the term capital gains. Ever heard of it before? If not, don’t worry.
We can help you!
- What are capital gains?
- How this term relates to equity release mortgages.
- All about capital gains tax.
As experts in the field of equity release, we’ve spent countless hours studying the subject. We saw a gap in the market and felt it’s essential to put together an easy guide to make mortgages more accessible.
Now, let’s find out precisely what capital gains are and how they relate to you!
What Are Capital Gains?
Don’t stress! Not all financial terms are overly complicated, especially when they’re explained in simple terms.
In a nutshell, capital gains refer to the profit you make on an asset at the time of its sale. In other words, if you sell the asset and get more money than what you paid for it, the revenue is capital gain.
On the other hand, if the sale price is higher than the purchase price, that would be a capital loss.
While capital gains can relate to several products, we’ll look at them in relation to property for this article.
Capital Gains Tax
Capital gains are often subject to taxation1.
Concerning equity release, there won’t be any capital gains tax.
Your equity release plan means that you are taking out a loan against the value of your estate2. Therefore, no capital gains will be owed against your estate, even if there is an increase in value.
How Do Capital Gains Work With Equity Release?
The capital gains on your home will help cover some of the interest3 owed to your lender when you pass away or move into permanent care.
Unless there’s an economic crash, homes are usually appreciating assets4. On average, the property price in the UK will rise 8% annually.
Therefore, when your house is sold, there could be a massive capital gain on the estate’s value.
With equity release interest rates at an all-time low, this could mean great news for the amount of inheritance you could leave your heirs.
Whenever you purchase an asset, you must always consider what the capital gains could be. Try your best to avoid depreciating assets unless they’re necessities.
With the right advice and purchasing a secure house, you could stand to make a lot of money when it comes to property. This will give you a fantastic amount of equity to release, should you require to opt for that route.