Can I sell my home or move house if I have equity release?
Can I sell my home or move house if I have equity release?
We are frequently asked by people considering equity release whether it is possible to sell their house or move in the future if they take out an equity release product such as a lifetime mortgage. The answer to this question is yes, you can sell your home with equity release, subject to meeting some criteria.
To kick-off, let’s look at the basics:
What is equity release?
Equity release is a financial concept that allows homeowners over the age of 55 to access a percentage of the equity they have in their home as a tax-free lump sum, without having to downsize or make mortgage repayments. The two main types of equity release products are a lifetime mortgage and home reversion.
With a lifetime mortgage (by far the most popular type of equity release), the loan is subject to an interest rate and therefore accrues an interest charge and, typically these are repaid when the property is sold when the owners no longer need the house. This could be because the homeowners move into long term care or pass away. The balance of the sale value, less the loan amount and interest charge then returns to the homeowner's estate.
You can read more in our article what is equity release and how does equity release work?
Why do people choose equity release?
An increasing number of older homeowners are releasing equity via equity release schemes as a means to increase their lifestyle, without increasing their monthly outgoings. For example, the large cash lump sum raised via an equity release product like a lifetime mortgage could be used for:
Buying a fixed-income product such as an annuity.
Home improvements.
Adapting the home to improve accessibility.
Paying for in-home care.
Wedding gifts.
Helping younger members of the family with a house deposit or education fees.
Once in a lifetime experiences or holidays.
However, equity release (whether it's a lifetime mortgage or home reversion plan) may not always be the most appropriate solution to raising funds, particularly if you are younger and still in work.
Our article is it better to release equity or remortgage has some ideas to help you make the best decision and make equity release work for you.
Can I sell my house if I have equity release?
Yes, you can sell your house if you have equity release. An equity release product, such as a lifetime mortgage, can be repaid at any point and by any means. For example, if you suddenly inherit a cash lump sum, sell an asset or win the lottery, you can repay the loan amount, plus the interest charges and end the equity release agreement. Equally, you can sell the house as long as the figures and/or any additional cash you have make the sums work for the lender (see can I move house if I have equity release below for more information). Be aware though that an early repayment charge may apply and these can be substantial.
Typically though, an equity release scheme is repaid via the sale of the property when the homeowners enter long term care or pass away.
Can I move house if I have equity release?
It is certainly possible to move house if your equity release provider offers a portable equity release scheme. All lenders have different criteria to meet, but in summary:
The property you are moving to must meet the lender's requirements (it must be freehold, for example).
If the property you are moving to is worth less than the existing one, you may need to pay back some of the loan and interest.
If the finances of the move or the property doesn't meet the lender's criteria, the loan and interest can be repaid in full with cash raised elsewhere. You may also have to pay an early repayment charge to the lender.
Some equity release providers offer downsizing protection, so you may be exempt from early repayment charges.
Our article can I lose my house with equity release looks at the situations where you may lose your house if you have an equity release scheme and considers how negative equity can affect borrowers. It's well worth a read to make sure you know the facts.
Top tips for moving or selling your home with equity release from a financial adviser.
Equity release is often best suited to those that don't plan on moving again as it can get a little bit complicated should you wish to move house or sell your home. However, some equity release mortgages are portable, so these are our top tips for moving from or selling a home with equity release:
Make sure you get financial advice from a financial adviser that is a member of the Equity Release Council and registered with the Financial Conduct Authority (FCA) to ensure you get responsible equity release advice.
Seek legal advice from an equity release mortgage legal specialist.
Always read the small print for details of the early repayment charge in advance of signing up to an equity release mortgage.
Ask your financial adviser or equity release mortgage lending expert to explain the interest to you in detail and how compound interest will affect the amount you owe.
Make sure your financial adviser explains the pros and cons of a lifetime mortgage against a home reversion scheme to make sure you choose the right equity release product.
If you are still in work, consider if a traditional mortgage (or remortgage) may suit you better, particularly if you could afford a monthly repayment.
Be sure to understand the negative equity guarantee on the equity release loan you are considering.
What’s next?
You can read our in-depth article, What is Equity Release and how does Equity Release work for a more detailed look at Equity Release or head over to our equity release calculator to get a quick estimate on the amount of money you could release from your property with a home equity loan without having to input any personal details.
How AV Trinity can help with your Equity Release questions.
If you need responsible equity release advice you can speak to a Chartered Financial Adviser here in Tunbridge Wells, wherever you are in the UK. Our financial advisers are Equity Release experts and on hand to help you find an equity release plan that suits your needs, whether that's a lifetime mortgage or home reversion plan. We are members of the Equity Release Council and signatories of the Financial Vulnerability Taskforce.
Your financial adviser can also offer broader financial advice on a range of topics from mortgages, remortgages, pensions and investments to inheritance tax and estate planning. We offer a free, no-obligation initial consultation at our office, over the phone or by video chat regardless of where you are in the country. Locally, we serve clients across Kent including Ashford, Maidstone, Sevenoaks and Tonbridge. In East Sussex, we have clients in Bexhill, Crowborough, Eastbourne, Hastings, Heathfield and Uckfield.
This article offers information about financial planning and should not be taken as personal advice. Equity Release will reduce the value of your estate and may affect your entitlement to state benefits. Think carefully before securing debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.