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Equity release plans allow you to unlock money tied up in your home and turn it into tax-free cash either as a single lump sum or in smaller, regular payments. There are lots of reasons people take out equity release such as moving closer to family, paying off debt, or going on holiday.
But what happens if you decide to sell or move house with equity release? And is it even possible?
The information on this page should not be considered as financial advice. If you are unsure what’s right for you, please speak to a financial adviser.
Can you move house if you have equity release?
Yes, you can move house if you already have an equity release plan, but you’ll need to discuss your options with your equity release provider first. You may want to relocate to a new area, downsize to a smaller property, or explore financial flexibility for retirement. All this is possible with equity release if your provider agrees to the move.
If you’re 55 or older, equity release can be taken through a lifetime mortgage or a home reversion plan. The amount of equity you can release depends on your personal circumstances such as your age, the property’s value, and the terms of your plan.
As equity release plans are secured against your property and involve a charge being registered on your property, selling your property will trigger the repayment process.
With equity release plans, the loan, plus interest, is repaid from your estate when you die or move into long-term care. If you sell your property with an equity release plan in place, you generally would use the proceeds to pay off your equity release debt. Any remaining money goes back into your pocket and can be used for whatever purpose you wish. Please see the section below if you’re thinking of transferring your current equity release plan to a new property.
It is important to note that any profit from the sale of your home could be reduced after clearing your equity release plan. Not only that, but some providers impose additional charges and fees if you choose to sell your property during the plan.
Can you transfer equity release to another property?
Yes, you can transfer equity release to another property. There are two ways of doing this:
1. Porting your existing plan to your new home
You can transfer your existing loan to your new property if your provider finds your new home suitable within their lending guidelines. This process is known as ‘porting’.
However, if the new home you are moving to has a lower value than your current residence, your lender may ask you to repay some of your loan. Also, if the new property doesn’t meet your provider’s lending criteria, the lender may refuse to port your equity release plan to that property. You could always keep looking for a new property that your provider would approve if it’s important to port the existing loan.
One of the main benefits of ‘porting’ is that your interest rates will remain the same because it’s the same loan.
If your equity release product is from an Equity Release Council approved lender, you have the right to port your loan, if the new property is approved by your lender. There won’t be any early repayment charges to pay.
2. Repay your current loan and take out a new one
One way to transfer existing equity release is to repay your current loan and take out a new one on your next property. Repayment usually comes directly from the proceeds of the sale and includes the original loan amount plus the interest that’s been accrued. Your new plan is likely to have a different interest rate but it’s worth noting that you don’t necessarily need to stay with the same provider if there’s a better option elsewhere. You would however have to take financial advice which you will need to pay for.
One other consideration is that if you’re not planning on downsizing your property, you’ll need to make sure there is a sufficient loan to value (LTV) available to take out a new loan.
Under the terms of your equity release plan, you may also incur an early repayment charge if you repay your loan.
Most lenders will also want to approve your new property before you move. This is to ensure it will hold its value when you pass away and it won’t enter negative equity.
Once the equity release loan has been repaid, any remaining money from the sale of the property is yours to keep. In other words, you can still benefit from selling your home while meeting your equity release obligations.
Depending on your lender, you’ll probably be charged valuation fees and arrangement costs with both options above. On top of that, there will be stamp duty, solicitor and conveyancer fees, and other costs to factor in.
Whatever you decide, it’s vital to speak with your provider as early as possible. Without their consent, you won’t be able to buy your new home until you agree on the future of your equity release plan, and you meet their specific lending criteria.
Need help with equity release?
Releasing equity from your home isn’t an easy decision. For a free and impartial chat, speak to one of our friendly advisers.
You can also order a free Equity Release brochure.
Can you sell or move house without transferring equity release to another property?
You can only take out an equity release loan on a home you currently live in. If you’re planning to move but don’t want to transfer your existing loan, you’ll have to pay it off. Speak to your equity release provider as early as possible if you’ve decided to move to ensure this process goes smoothly.
If you decide not to move to a new property, you can carry on living in your home until the last remaining borrower moves into long-term care or passes away. Only at that point will you need to repay your equity release loan, and any money from your estate not used to pay off any outstanding debts including equity release products will go to you or your chosen beneficiaries.
With lifetime mortgages, you’ll also benefit from any increase in the valuation of your home. However, if you’ve taken out a home reversion plan, you won’t enjoy the same access to some or all of the additional equity you’ve accumulated as you’ll have sold a percentage of your property to your equity release provider.
Do you still own your home with equity release?
This all depends on which type of equity release product you have. Lifetime mortgages are secured against your property, so if you take one out, you’ll still own your property.
With a home reversion plan, you sell all or some of your property to your equity release provider. While you can continue living in the house, you’ll no longer be the sole owner. Please note LV= does not offer home reversion plans.
What are the downsides to equity release?
One of the downsides to equity release is that interest on your loan can grow quickly, and there are costs involved with setting up your plan. As a result, you may end up with less value in your home to leave your family or chosen beneficiaries when you die.
If you’re considering equity release, you can discover how much cash you could access from your home using our free equity release calculator. Please remember this is a guide, as all equity release providers may have different lending limits.
How should you start the process of moving house with equity release?
If you’ve released equity from your property and want to move to a new home, there are several steps to the process. These include:
- Contact your equity release provider: Ultimately, your provider needs to approve your move before it can go ahead. Get in touch early to understand their needs and the criteria you need to meet.
- Speak to a financial adviser: Seek professional financial advice, ideally from the same source that put together your current equity release loan.
- Select the right estate agent: Find a reputable estate agent and ensure the sale of your property is sufficient to pay off the loan.
Are you considering selling your home with equity release?
Whether selling your house with an existing equity release loan against it is the right choice for you depends on your personal circumstances and financial needs It can provide financial benefits both in life and retirement however, the process can be complex and comes with a specific set of risks. If you are thinking about selling your home with equity release, it is important to listen to professional equity release advice before you proceed, to understand the benefits, risks, and costs involved.
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