What happens to equity release when you die or enter care?
What happens to equity release when you die or enter care?
An equity release plan is usually repaid when the last surviving borrower dies or moves permanently into long-term care. In many cases, the money comes from selling the home. The contract sets the deadline for repayment, with twelve months from the date of death a common figure. Interest continues to accrue until the lender is repaid, so the family is working against a deadline while the debt is still growing, often alongside probate and everything else that follows a death.
Little of this gets much attention when a plan is taken out. The questions concern a moment nobody particularly wants to imagine. Twenty years or more can pass between taking out a plan and repaying it, and the people dealing with the debt at the end are often not the people who signed the agreement. Adult children may encounter the arrangement for the first time when they open their parents’ paperwork.
In a hurry?
An equity release plan is repaid when the last surviving borrower dies or moves permanently into long-term care, and the money usually comes from selling your home. Your contract sets how long your family or heirs have to arrange the sale, commonly twelve months, and interest carries on running until your lender has been repaid. A surviving partner named on the plan keeps the right to stay. Nobody inherits the debt either, provided the plan meets Equity Release Council standards and its terms have been kept to, because once your home has been sold and the agents and solicitors have been paid, neither you nor your estate can be asked for a shortfall.
Speak to a specialist adviser →Meanwhile, later life is becoming increasingly expensive to fund, while successive governments have left the question of who should meet the cost of care unresolved. Additional retirement income is therefore being drawn from property wealth, rather than pensions and the home is often still expected to do two jobs at once: fund later life and leave something to the next generation. Equity release prioritises the first. How much remains for the second is only known when the plan comes to an end.
That makes the events that trigger repayment more important than they might initially appear. They can determine not only when the debt must be settled, but what happens to a surviving partner and, ultimately, what is left for the estate.
This article works through the end of an equity release plan and what it leaves your family to do:
How long do your family have to repay an equity release plan after you die?
Your equity release contract sets how long your family has to repay a lifetime mortgage after your death, and twelve months from the date of death is a common figure. There is no single rule across the market, though, so the number that matters is the one in your own paperwork. Interest does not stop when you die. It continues to accrue until the lender is repaid, meaning a slow sale increases the balance rather than simply delaying the bill. Your contract will also set out how often that interest is calculated and added to the debt.
The difficulty is that much of that twelve-month period may be taken up before a sale can complete. Your executors can value the property and put it on the market straight away, but in England and Wales they generally cannot complete the sale until probate has been granted. The grant gives them the legal authority they need to deal with the estate. Applying for it involves valuing the estate and establishing whether any inheritance tax is due, and the grant itself can take around twelve weeks to arrive after the application. Where there is no will, the equivalent authority comes through a grant of letters of administration, so the same issue arises. Scotland and Northern Ireland have different processes, through confirmation and a separate grant respectively.
The house still has to be looked after while all this is happening. Lenders generally require buildings insurance to remain in place until the loan is repaid, while standard home insurance policies often restrict cover once a property has been empty for 30 to 60 days. Executors should therefore tell the insurer early and may need specialist cover for an unoccupied property.
Council tax is different. In England and Wales, an unoccupied property following a death is generally exempt until probate is granted and for six months afterwards. Scotland has a similar exemption running from confirmation. Northern Ireland operates a different system of rates, with the estate needing to apply for the relevant relief. Maintenance, security and other running costs remain the responsibility of the estate.
Executors should tell the lender about the death as soon as possible and keep it updated as the sale progresses. Whether the repayment period can be extended, and what happens if it expires, will depend on the contract. It is a conversation worth having in month three rather than month eleven.
What happens if only one of a couple dies?
Nothing has to be repaid when the first of a couple dies, provided both are named as borrowers on the plan. The lifetime mortgage simply continues in the survivor’s name on the same terms. Where the lender is a member of the Equity Release Council, the industry body that sets voluntary standards for equity release, those standards give borrowers the right to remain in their home for life, or until they move permanently into care, provided it remains their main residence and they continue to meet the terms of the contract. Interest continues to roll up during this time, adding to the balance rather than being paid off, so the debt grows throughout the survivor’s lifetime.
That right to remain comes from being named on the plan, not simply from living in the property. Someone else who lives there (whether a partner who moved in after the plan was taken out or a relative who has lived there for years) does not automatically have the same protection. Once the last-named borrower dies or moves permanently into care, the plan becomes repayable. If a plan was taken out before a second marriage or a change in the household, it is therefore worth checking exactly who is named on it.
A surviving partner does not have to keep the plan running. They may instead want to repay it, perhaps to move closer to family or to stop the debt growing against a home they hope to leave to their children. Early repayment would normally trigger a charge, although some lenders offer what is sometimes called a compassionate window, waiving the charge if the loan is repaid within a specified period after the first borrower dies or moves into care. The length of that window varies by contract and is not an Equity Release Council standard, so the paperwork is what matters.
Moving to a smaller home is different from repaying the mortgage. Equity Release Council standards require member lenders to allow borrowers to move to a suitable alternative property and take the lifetime mortgage with them, subject to the lender’s lending criteria at the time. A surviving borrower may therefore be able to downsize without settling the loan. The new property must still be acceptable to the lender as security, however, and some types of property may be excluded. It is worth checking before making an offer.
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Join our readers →What happens if you move into a care home?
A permanent move into long-term care makes the loan repayable in much the same way as a death, but the important word is ‘permanent’. A respite stay, a period in hospital or rehabilitation after a fall does not bring the plan to an end. The lender’s terms will set out how permanence is established, and will generally require evidence from a medical practitioner rather than simply accepting that a move is permanent.
Care provided in your own home usually leaves the plan untouched, because the question is whether you have moved out for good. Where a couple took the plan out together, the loan only becomes repayable when the last of them has died or moved permanently into care. One partner moving into a care home does not, in itself, mean that the other has to leave their home or repay the mortgage.
If the move is permanent, the Equity Release Council’s standards require member lenders to waive any early repayment charge once the required medical evidence has been provided and the terms of the loan have been met. This applies whether the care is provided by a commercial provider, the NHS, a local authority or relatives. Waiving the charge on a move into care has long been standard among Equity Release Council members; what changed in 2025 was its extension to care provided by relatives. An older plan may therefore not include the wider provision. The contract will also set out how long the family has to sell the property, with the Equity Release Council giving a usual range of six months to a year.
The money released from the home is treated differently from the home itself, and that distinction matters when means-testing begins. While you are living in the property, your main home is generally disregarded when assessing entitlement to benefits and, in England, when your local authority assesses what you can afford towards care provided at home. Cash held in an account is different: it can count as capital. Releasing equity can therefore change a person’s financial assessment, potentially turning someone who previously qualified for help into someone expected to contribute more towards their own care.
A permanent move into a care home changes the position again because the property left behind will usually become relevant as capital. In England, it is disregarded in certain circumstances, including during the first twelve weeks of a permanent placement and where a spouse, partner or other qualifying relative continues to live there. The other UK nations have their own rules and disregards. Our article on funding long-term care explains how these assessments work.
It is important to understand that spending or giving away the money after a sale does not necessarily avoid a means test. A local authority assessing your finances can treat capital you no longer have as though you still had it if it considers that you deliberately deprived yourself of assets to avoid care charges. The rule can apply to substantial spending as well as gifts. Where an asset has been transferred for less than its value with the intention of avoiding care costs, a local authority in England can also pursue the person who received it, although only up to the value of the benefit they gained. Other parts of the UK have similar rules under their own systems.
Scotland is a partial exception to this picture. Local authorities there pay a set weekly amount towards assessed personal care, and towards nursing care where that is needed, regardless of income or savings. Those payments cover only part of the cost of a care home, however. Accommodation and living costs remain payable and are still subject to a means test, so releasing equity can still affect how much you are expected to contribute.
What does the no-negative-equity guarantee actually cover?
The no-negative-equity guarantee means neither you nor your estate should be left owing more than your home is worth. If the sale proceeds do not cover the outstanding balance, the lender writes off the difference rather than pursuing your beneficiaries for it. It is a product standard of the Equity Release Council, not a legal requirement, so it applies to plans from member firms. A provider whose plan does not include the guarantee must make that clear.
The guarantee comes with conditions, and some of them can be easy to overlook. The Equity Release Council’s standards require your executors to sell the property for the best price reasonably obtainable and to have complied with the terms of the loan. Any shortfall is calculated after reasonable costs of sale. If those conditions are not met, the lender may be able to recover the difference. An estate that sells the property cheaply to a family member, for example, or allows it to fall into serious disrepair cannot necessarily rely on the guarantee.
Some contracts also qualify the guarantee according to how the loan is repaid, and lenders recognise circumstances in which it may not apply. Those exceptions will be set out in the terms and conditions. Executors should therefore read the paperwork before deciding how to settle the balance, rather than assuming the guarantee applies regardless of how the sale is handled.
The guarantee limits what can be owed; it does not limit how much of the home’s value the loan can consume. Over a long retirement, a lifetime mortgage on which no repayments are made can absorb most of the property’s value. Our article on alternatives to equity release looks at other ways of raising money in later life.
Can equity release be repaid without selling the property?
A lifetime mortgage can be repaid without selling your home because the lender requires the outstanding money, not the property itself. Your beneficiaries can find that money from other assets in the estate, a life insurance policy, their own savings or, where the lender will accept it, a conventional mortgage secured against the property. For a family determined to keep a house that has been passed down through generations, refinancing may be the only practical way to do it.
Repaying from other assets rather than selling the property would not normally attract an early repayment charge once the last borrower has died or permanently moved into care, because that is the event that brings the plan to an end. Lenders set out their position in their terms, while the Equity Release Council’s standards require member lenders to waive the charge following a permanent move into long-term care once the required medical evidence has been provided and the loan conditions have been met. The lender will generally need to confirm that the relevant conditions have been satisfied.
The first step should be to ask the lender for a redemption figure. That is the amount the executors need to find, and it can change as interest continues to accrue. They should request an updated figure close to the date of repayment rather than relying on one obtained months earlier. It is also worth checking whether repaying without selling the property has any implications for the plan’s no-negative-equity guarantee.
Voluntary repayments can reduce the balance long before the loan becomes repayable. Equity Release Council standards require member lenders to allow penalty-free repayments, subject to their lending criteria. Paying some or all of the interest as it accrues can prevent the debt from compounding and preserve more of the home’s value for the eventual beneficiaries. Lenders usually set annual limits on how much can be repaid, and older plans may not offer the same facility, so the terms of the individual plan matter.
Is a home reversion plan any different at the end?
A home reversion plan ends differently from a lifetime mortgage because there was never a loan to repay. The provider bought all or part of your home at the outset, usually for less than its market value, and you continued to live there under a lifetime tenancy until you died or moved permanently into long-term care. At that point, the property is sold and the proceeds are divided according to the shares each party owns.
What a home reversion plan leaves your family is more predictable than a lifetime mortgage, though not necessarily better for the estate. Nothing compounds, so there is no growing debt to erode the value of the home. But the share you sold belongs to the provider regardless of what happens to property prices. If the home has trebled in value since the plan began, so has the value of the provider’s share.
Far fewer home reversion plans are sold today than lifetime mortgages, but plans taken out years ago are still running. For an executor, establishing which type of equity release was taken out is therefore one of the first things to check.
Not sure what your own plan says?
Our advisers are qualified in both mortgages and equity release, so they can go through your contract with you and set out what it means for your partner, your executors and whoever inherits. Find out how we work with clients across the UK.
Equity release advice →What does a plan leave your executors and beneficiaries?
Your executors are the people who have to deal with an equity release plan after your death, and in England and Wales they are personally responsible for administering the estate correctly. They must establish what is owed and settle the estate’s debts before distributing what remains to beneficiaries. If they distribute money and the estate is then unable to meet a debt, they can potentially be required to make good the shortfall themselves. Placing statutory notices for creditors in the Gazette and a local newspaper is not compulsory, but it can protect executors against claims from creditors they did not know about. An equity release balance can also set the pace of the wider administration because it is a debt that continues to grow while the estate is being dealt with.
For inheritance tax, a loan secured against your home is generally deducted from the value of that property rather than from the rest of your estate, provided the estate actually repays the debt. Where an estate is relying on the additional allowance available when a home passes to direct descendants, the allowance applies only to the value of the property left after the lender has been paid. The definition of direct descendants is wider than children and grandchildren and can include stepchildren, adopted children, foster children and children subject to a guardianship arrangement.
Where a will divides an estate unevenly, the debt does not necessarily fall equally on all beneficiaries. In England and Wales, a debt secured against a property is generally payable from that property unless the deceased has indicated otherwise. A general instruction in a will to pay debts is not necessarily enough to change that position. So if your home passes to one child and your savings to another, the child receiving the house may receive its value after the equity release balance has been settled, while the other receives their share of the savings intact. Scotland has different rules, and older wills may not have anticipated the equity release plan at all. The will and the plan should therefore be considered together, particularly while there is still time to change either.
Make the plan easy to find. A note of the lender, plan number and location of the paperwork, kept with your will, can save your executors weeks of searching. Telling the people who are likely to inherit that the plan exists is even better. It means they are not discovering the debt for the first time in the same week as the funeral.
What's next?
What happens at the end of an equity release plan is ultimately determined by your own contract, and no two plans are identical. How long your estate has to repay the balance, what counts as a permanent move into care and when an early repayment charge is waived are all matters for the paperwork, not the brochure. These are terms worth understanding before you commit and, if you already have a plan, before your family has to deal with it.
Our Equity Release Advisers offer a free initial consultation if you want to understand what your equity release plan could mean at the end, or are considering equity release in the first place.
We advise clients across the UK, including locally throughout Kent and East Sussex, with clients in Tunbridge Wells, Sevenoaks, Maidstone, Tonbridge, Crowborough and Eastbourne.
This article is for general information only and does not constitute personal financial advice or a recommendation. The suitability of any investment approach depends on individual circumstances, objectives and the current regulatory environment. Tax treatment and investment rules can change over time, and their effect will depend on personal circumstances. Investments can go down as well as up, and you may get back less than you invest. Your home may be repossessed if you do not keep up repayments on your mortgage. Equity release will reduce the value of your estate and may affect your entitlement to means-tested benefits. Always ask for a personalised illustration before proceeding.
