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Can I Sell My House if I Have Equity Release?

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Can I sell my house if I have an equity release plan? This is a common question and here’s everything you need to know.

What is equity release?

Equity release is a way for homeowners aged 55 and over to access some of the money tied up in their homes without having to move houses. 

The money can normally be taken as a lump sum, regular payments, ad-hoc payments, or a combination of these. 

The money is repaid when you die and your home is sold, or when you go into long-term care. 

You’re probably wondering “can I sell my house if I have equity release?”. If you have taken out an equity release plan it is usually still possible to move house – but there are some things you should be aware of. 

What type of equity release plan do you have?

There are two main types of equity release: lifetime mortgages and home reversion plans. 

If you have a lifetime mortgage, you can transfer it to your new home.

Things are a bit trickier if you have a home reversion plan as this involves selling a percentage of your home.

All equity release plans approved by the Equity Release Council allow you to move to a ‘suitable alternative property’.

Porting your lifetime mortgage

Transferring your lifetime mortgage to a different property is known as ‘porting’.

The process is quite similar to taking out an equity release plan in the first place, although you are not required to take independent financial advice. 

In some situations, it might be best not to port your equity release plan but to pay it off and take out a new plan on your new home. 

Is your new property suitable?

For an equity release porting request to be approved, the lender will need to assess the property you are buying. This is because it will want to be sure it can sell the property when you die or move into long-term care. There is likely to be a valuation fee for your new property.

The new property will need to be in a reasonable condition and meet certain other terms. For example, it will need to be made of standard construction materials, have a sufficiently long lease (if leasehold), be habitable, and not be a specialist retirement property. 

What happens if I move to a cheaper property?

If you move to a cheaper property, you might need to repay some of the equity release money to the lender. This is because your new home will offer the lender less security and, when the time comes, it might not be able to sell it at a sufficient price to cover the capital and interest that you owe.

But don’t worry – you can use money from the sale of your property to pay the equity release lender.

Taking out a new equity release plan

If you’re moving house, you might decide to pay off your existing equity release plan and take out another one on your new property.

Although this might mean you find a cheaper equity release plan, there are various fees to consider.

Firstly, your lender might charge early repayment charges (ERCs). Secondly, you are required to take independent financial advice, which will be chargeable. 

However, some equity release lenders offer ‘downsizing protection’. This allows borrowers to pay their equity release back early when they move home, without incurring any early repayment charges.

What happens if I go into long-term care?

If you move into long-term care, your home will need to be sold to pay off the equity release lender. If you live with your partner, this will only happen when you both go into care or pass away. The executors of your will normally need to sell your home and pay off the equity release lender. 

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Last Updated: January 19th, 2024

Phil Spencer

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