Can I Sell a House If I Have An Equity Release?
So, you want to sell your house. Will your equity release plan still be valid, and will it be legal to sell the home you’ve released equity from?
First of all:
Porting is when you transfer or move your lifetime mortgage to a different house, your new house. But how can you do that?
How Do I Transfer My Equity Release To A New Property?
When you move your plan to another house, it’ll be very similar to taking out the plan the first time. You’ll need to get financial advice, of course, so you’ll need to revisit your equity release advisor. They’ll go through research and what your intentions and needs are. Then they’ll know how to go forward.
There needs to be a few things in place:
- The construction of your new house and its features will have to be the same or very similar to your current house, and the new or moved plan must be identical to others on the market. Speak to your advisor before you sign the papers for your new home.
- Some advisors tell their clients to port their current equity release plan to the new house, or they may ask them to resell the plan and take out a new one.
Let me tell you something.
Every provider out there is supposed to give you a KFI for every plan in similar formats. That wat, you can easily compare plans and strategies.
Once you compare, you’ll see a few differences:
- Valuations fees
When you port the current equity release plan on your house, you’ll have to pay this fee beforehand. This money won’t and can’t be refunded to you. If you want to take out a new plan, you’ll be able to get a new plan with free property valuation.
When you port your current equity release plan, you’ll be able to get further legal advice, or you can proceed without it. However, taking out a brand new plan will require you to get that legal advice at an extra cost.
You should keep these points in mind when you’re deciding your financial future. And you need to remember that there are even more costs to pay when you move into a new home. But now, should you transfer or port1 your plan?
Should I Transfer My Equity Release To Another Property?
Now the decision is whether you should port or take out a brand new equity release plan. Here’s a table to lay out the pros and cons of each:
|Porting||You won’t be required to get legal advice, saving you money.||You’ll need to pay a valuation fee up-front. And it isn’t refundable.|
|You might like your current equity release provider, and you don’t want to change.||There may be other fees like legal fees and transfer fees.|
|The whole process is much quicker.|
|New equity release Plan||You get the best rates on the market without being limited by your current plan.||Early repayment charges for your current loan may be charged.|
|You’ll have access to plans with free valuation fees and other perks your current plan doesn’t include.||You have to get legal advice for your new plan at an extra charge.|
By looking at these points, you might want to talk to a professional about your specific circumstances and hear what they think the best option is for you. They’re also supposed to give you a report projecting total costs for each option and each plan.
Let me tell you:
This is crucial when moving from one plan to another and charged an ERC on your current plan. Even though a new rate looks good, it may end up costing you more throughout the program.
A new equity release interest rate will apply when porting your plan. Plus, if there’s any ERC window, it’ll most likely reset as well. So that’s another pro. A con is that you won’t get the same terms on your new plan if that’s what you wanted.
Why Wouldn’t I Be Able To Transfer My Equity Release To A New Property?
There is some reason you won’t transfer your ER plan to the new house. One reason is that the new home doesn’t meet the requirements of the lender. So, you won’t be able to port plan.
But listen here.
Equity release providers have become much more flexible in recent years when it comes to lending requirements. There are some things they won’t budge on, though:
- Houses made from non-standard construction (like some types of concrete)
- Age-restricted properties (like over 50’s retirement homes)
- Leasehold properties with little time remaining
- High flooding risk houses
- Homes requiring renovation (like houses needing complete rewiring, full modernisation, new central heating, etc.)
Ask this particular question to your advisor before you forget. You have to make sure about these factors, so you don’t buy the wrong property and waste money. Say you move into a house that’s cheaper than your current one. What’ll happen to your equity release plan when that happens? Will you get your money back?
Effects Of Moving To A Cheaper Home
When you move into a new home, and it’s valued less than your previous home, you’ll have to repay part of the release equity to your provider. So, if the property is worth 50% less, you’ll need to refund 50% of your loan. Why? Because your provider will have 50% security in your new house.
This doesn’t have to be a worry. Generally, people can do so thanks to the sale of money they received for the last house. Let’s have a look at another real-life example.
What Happens To My Equity Release If I Don’t Move It To Another Home?
Generally, Equity release plans taken out against primary residence, as it is with residential mortgages. If you have into a new house, but you don’t port your plan, you’re most likely have to repay your equities plan. This may cost you early repayment charges or EPC. No, there is a feature that has become very popular over the last few years.
You can now waiver the ERC charges with this lovely feature called downsizing protection. However, every provider has a different approach and quality when it comes to that. So you must make sure to find out what your provider offers. Don’t repay the loan and then incur ERC charges if you’re not aware of it. Instead, be sure when you repay.
Many traditional equity release plans let you move your loan to a new house if you want to sell your original home, provided your lender approves the new place first. In this scenario, you’ll have to pay off some of the loan early, which can trigger early repayment costs.
All equity release schemes that the ERC approves let you move whenever you want to. If you took out a lifetime mortgage, you could transfer it to your new house. However, with a home reversion plan, you won’t own your property entirely.
The short answer is yes. You can transfer an equity release mortgage to a new property in most cases. In general, your loan provider won’t be able to approve properties that can’t be sold on the open property market – for example, retirement complex homes.
Equity release allows you to release money tied up in your home, so you get cash to use as you like. So, if you’re considering home improvements or adding office space, or if you’re looking to help your family financially, planning a luxury holiday or if you want extra retirement income, releasing equity could be a good idea.
It’s very flexible as well, as you can move to another house, even if you’ve taken out an equity release loan against it. You can also move from one plan to another if your current loan plan doesn’t suit you anymore.
After hundreds of hours of testing & reviewing, we have strong opinions about what makes the best ABC.
We highlight the pros, cons & features of the ABC.
Luckily, when you take out an equity release loan, you are allowed to move into another home, sell your current home and then move your equity release plan to the new house. No problem. In recent years, equity release has been amazingly flexible in that regard.
If you still have some unanswered questions, please contact us, and we’ll help you out.