Can I Sell My House With Equity Release in 2022?

Are You Worried About Taking Out Equity Release Because You MIGHT Sell Your House?
Contributors: Nicola Date, Katherine Read. Reviewed by Francis Hui
Are You Craving a Change of Scenery but Have a Mortgage Against Your Property? Don’t Worry! You Can Sell Your Current House and Move Into a New One. Here’s What You Need to Know.

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Can I Sell My House if I Have an Equity Release Plan?

The great news is that, yes, you can sell your house with an equity release plan, but it’s not as straightforward as you think.

Whether you’re moving in with family, going overseas, or simply want to downsize,

Selling your home with an equity release comes with terms and conditions, since your plan is intended for life.

Luckily, we’re here to help you navigate the process.

By reading this article, you’ll discover:

  • The consequences of selling your home with an equity release plan.
  • What it means to port your plan.
  • The secret to downsizing protection.

At SovereignBoss, our goal is to give you the information you need, as simply as possible.

We’ve looked into the terms and conditions of ending your equity release plan early, stipulated by leading providers.

Here’s what we’ve found.

Does Equity Release Tie You to Your Property for life?

The great news is that equity release does not tie you to your property for life.

However, you may incur early repayment charges if you end your plan before the time.

This could depend on:

  • The terms and conditions of your plan.
  • How long you’ve had it.
  • The circumstances surrounding your property’s sale. This could be to move to a new country, to move in with friends or family, or to simply move to a new home or town.

If you choose to sell your house, most basic equity release plans enable you to transfer your mortgage to a new property if the lender approves it.

On the other hand, if you move into a significantly less expensive home than your current residence, the lender could decide it’s unwilling to loan as much against it.

In this instance, you might have to settle some of the mortgage early, potentially resulting in early repayment charges.

How Selling a Home with Equity Release Works

Before opting for equity release, you should double-check the terms of your plan.

See whether you can transfer the loan to a new home if you decide to do so in the future.

As long as your plan is through a member of the Equity Release Council, your lender should be able to assist you in moving to a “suitable alternative property.”

When the time comes, the new property will be thoroughly assessed to ensure that the lender’s investment is still protected.

If your equity release provider is pleased with the property you want to purchase, they will simply transfer the policy to the new home. This is referred to as ‘porting.’

Properties Your Lender Won’t Accept When Porting Plans

Your lender will most likely not accept the following properties if you want to port your equity release plan:

  • Specialist retirement properties
  • Static and mobile homes
  • Houseboats
  • Guesthouses
  • B&Bs
  • Farms
  • Studios
  • Basement flats
  • Houses made from non-standard construction
  • Leasehold1 properties with little time remaining
  • High flooding risk houses
  • Homes requiring renovation (like houses needing complete rewiring, full modernisation, new central heating, etc.)

If you’re moving to a new country or want to move to a restricted property, you’ll likely incur ‘early repayment charges’.

Who Can Port My Equity Release for Me?

Your equity release lender will port your equity release plan.

However, before making any decisions, book an appointment with your financial adviser to discuss your options.

Your adviser will then guide you through the entire process, assisting you in porting your plan.

Are There Alternatives to Porting My Equity Release Plan?

Yes, there are alternatives to porting your equity release plan.

For example, depending on your circumstances, your advisor may suggest that you rather sell your home with the current lifetime mortgage plan and take out a new one.

What’s great about this option is that you may access a lower interest rate or a modern, flexible plan.

On the other hand, this does come with the additional expenses of unlocking equity (like the cost of a solicitor)2 and possible early repayment penalties.

What is Downsizing?

Downsizing is typical for individuals in their later years who have raised their children in a big household with numerous bedrooms, and then decide to relocate to a smaller home.

If your kids are out of the house, it might be time to move to a smaller or cheaper property.

In addition to freeing up equity, downsizing has the following benefits:

  • It lowers the amount of housework you’ll need to do, and will reduce garden and property maintenance costs.
  • Downsizing also means that you’ll consume less gas and electricity, drastically reducing your bills.
  • Finally, if your home has stairs, this may be challenging in later life. Downsizing can mean moving to a property that’s more suited to the elderly.

Luckily, Equity Release Council3 members offer you downsizing protection.

How Does Downsizing Protection Work?

Downsizing protection allows you to move to a smaller or cheaper home and pay off your equity release plan without penalty.

This means that if you pass away, your beneficiaries will not have to worry about the loan being repaid and that they will receive a larger inheritance.

It’s a rule that’s been implemented by the Equity Release Council.

The downsizing protection offered by each lender varies somewhat.

Some lenders, for example, only allow you to relocate after at least five years have passed since the start of your lifetime mortgage.

Your lender will conduct a valuation on the new property and assess whether it is suitable for transferring the lifetime mortgage. If it’s not, downsizing protection will come into play.

Early Repayment Charges

An ‘early repayment charge‘ is a penalty that your lender may impose if you repay your equity release plan early.

Early repayment charge rules may differ from one lender to the next.

For example, during the first 5 years of your plan, you may be subjected to an early repayment charge is 5% of the initial advance, plus completion fees.

From there, it may be 3% for the next 5 years, and then no charges at all.

Got Questions? Check These First

Can I Sell My House If I Have An Equity Release Plan?

Can You Move If You Have Equity Release?

Can I Transfer My Equity Release To Another Property?

Is Equity Release A Good Idea Because It's Flexible to Move?

Conclusion

In 2022, equity release doesn’t mean a life sentence in your home.

While this may have been different in years gone by, the industry has since expanded, showing vastly more flexibility with most plans.

While early repayment charges are a big consideration, they can sometimes be avoided.

Your best bet is to make an appointment with your trusted financial adviser to discuss selling your home with an equity release plan.

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Editorial Note: This content has been independently collected by the SovereignBoss advisor team and is offered on a non-advised basis. Sovereignboss may earn a commission on sales made from partner links on this page, but that doesn’t affect our editors’ opinions or evaluations. Learn more about our editorial guidelines.

rachel w

Rachel Wait
Personal Finance Journalist

Rachel is an experienced finance journalist and editor with a particular interest in personal finance and consumer affairs. She has vast experience writing about money issues, property, insurance, and consumer affairs, and you’ll find her articles regularly featured in top media and newspaper publications.
John Lawson

Written by
John Lawson
Founder SovereignBoss

John is passionate about education and has made it his life-long mission to assist UK citizens on their future financial options, with a specialist interest in equity release, and SovereignBoss is the natural extension of this passion.
francis

Reviewed by
Francis Hui
Senior Risk Manager

Having held various high-level roles across the industry, Francis is truly an expert in aiding UK citizens in their financial decisions and risk analysis. His unique insight and statistical knowledge make him the perfect person to help you take your financial future to the next level.
kath icon

Katherine Read
Consumer Affairs Writer

Since joining the editorial team at SovereignBoss, Katherine has become focused on bringing transparency to finances and opportunities for those approaching retirement age. She writes on the topics of equity release, home reversion, and mortgages.
nicola

Nicola Date
Writer & Journalist

Nicola is a financial writer for SovereignBoss and is passionate about the opportunities that equity release can open up for homeowners. Her extensive business experience and deep understanding of the industry means that she’s always up-to-date with the latest developments.

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