Equity release schemes are a popular financial solution for homeowners over 55 in the UK that allows homeowners to release value held within their homes without the need to move home or sell entirely. However, sometimes things change and you might need to sell your property after taking out Equity Release.
There are two types of Equity Release:
- Lifetime Mortgage
The most common form of equity release. You borrow against the value of your home while keeping ownership – The loan and any interest are repaid when you pass away or move into long-term care. - Home Reversion Plan
With a home reversion plan, you sell some or all of your property to a provider in exchange for a lump sum or regular payments. You also keep the right to live in the home rent-free for the rest of your life or until you move into care.
Can You Sell Your House with Equity Release?
Yes, you absolutely can sell your home even if you have an equity release plan.
With a Lifetime Mortgage:
The homeowner can sell the property, but the outstanding loan and any interest must be repaid. Some lifetime mortgages include downsizing protection, which lets you move to a smaller property without getting penalised. This is a great option for downsizing in retirement.
With a Home Reversion Plan:
Since you’ve sold a portion or all of your property to the provider, selling the house means they are entitled to their share of the sale proceeds.
Before Selling with Equity Release
There are a few important things to note when selling a property if you have an equity release plan:
1. Early Repayment Charges
Some equity release plans impose early repayment charges if you sell your home before the plan ends. Review the plan’s terms to be sure whether you’ll have to pay these kinds of fees – this could help you make a decision as to whether selling is right for you.
2. Downsizing Protection
If your lifetime mortgage includes downsizing protection, you may be able to move to a less expensive property without getting penalised. This can be a fantastic option for families downsizing after children move out or for older residents who need less responsibility to maintain in later life. Not all plans offer this feature, so it’s always best to check with the provider of the equity release plan.
3. Professional Advice
Whilst we would hope it wouldn’t be, sometimes selling a property after equity release can get a bit complicated. It’s recommended to consult a financial advisor to make sure you’re kept in the loop of what’s going on and you get the best benefit out of your property. This can also be incredibly helpful if you’re helping loved ones go through the process who may need more explanation/understanding of the process to feel comfortable.
4. Equity Release Council Approval
It is recommended to choose a plan backed by the Equity Release Council to ensure you have added consumer protection – whilst not necessary, these plans are good for giving you that little extra peace of mind as either a family member or for yourself.
5. Moving into Long-Term Care
If you or a family member move into long-term care, the equity release plan is repaid from the sale of the property. Make sure the property owner and any relevant parties, such as a power of attorney, are kept up to date with the process and know how it works.
Staying in Your Home
Some equity release plans mean you can sell your property while continuing to live in it under certain conditions. For example, a lifetime lease may let you or the property owner remain in the home rent-free until they pass away or move into care. This can offer financial flexibility while ensuring you maintain a stable living arrangement. This is a great option for family members who might not wish to move into care and require a stable living arrangement, but less of a financial burden.
Selling a house with an equity release plan is not only possible but is often a practical solution for changing circumstances. However, it’s important to understand the specific terms of your equity release plan and consider the financial impact of doing so. Seeking professional advice and ensuring your plan is approved by the Equity Release Council are essential steps to making an informed decision. If you’re helping out a family member or loved one with the process, it’s also critical to ensure that you understand the process fully and the implications it may have on you and the homeowners before selling.
Whether you’re looking to downsize, relocate, or simply adapt to life’s changes, Premier Equity Release is here to help. Contact Us Today to explore your options and make the best decision for you and your family’s financial future.