Can I Sell My House If I Have Equity Release

Understanding Equity Release

Equity release allows homeowners over the age of 55 to access some of the value locked up in their property without having to move out. The two main types of equity release in the UK are lifetime mortgages and home reversion plans. With a lifetime mortgage, which is the most common option, you borrow against the value of your home, and interest is usually rolled up until the loan is repaid when you pass away or move into long term care.

With a home reversion plan, you sell a share or the whole of your property to the provider in exchange for a lump sum or regular payments, but retain the right to live there rent free for the rest of your life. Both types of plan are regulated and must be provided by companies approved by the Financial Conduct Authority and members of the Equity Release Council to ensure consumer protection.

Whichever plan you have chosen, selling your property while an equity release agreement is in place must be done carefully and with your lender’s involvement.

Can You Sell the House

Yes, you can usually sell your house if you have equity release, but it is not as simple as with a standard mortgage. If you have a lifetime mortgage, most plans are portable, which means you can move house and transfer the loan to a new property, as long as it meets your lender’s criteria. This is known as porting. The new property must be acceptable security for the loan, which means it needs to be in good condition, of standard construction and suitable for resale.

Before selling, you will need to contact your equity release provider and inform them of your plans. They will carry out an assessment of the new property to ensure it meets their requirements. If approved, the loan is transferred and the agreement continues on the new home. If the new home is worth less than your current one or if you wish to downsize, you may be required to repay part of the loan to reduce the balance in line with the new property's value.

If your plan is not portable, or if you do not wish to transfer the plan to a new home, you can still sell the house, but you will need to repay the equity release loan in full when the sale completes. This repayment includes the original amount borrowed plus any rolled up interest, which may have grown significantly depending on how long the plan has been in place.

Early Repayment Charges and Costs

One of the key issues when selling a home with equity release is the possibility of early repayment charges. Some plans include significant penalties if you repay the loan within a certain period, especially during the early years. These charges are designed to reflect the lender’s loss of interest income over the expected lifetime of the loan.

The terms vary depending on the provider, but some early repayment charges are fixed, while others are linked to movements in government bond yields or the duration of the loan. It is important to check your original equity release agreement or speak to your provider to understand whether early repayment charges apply and how much they might be.

In some cases, these charges can be waived or reduced if the sale is due to certain life events, such as moving into long term care or selling due to ill health. Again, this depends on your provider’s policies and the exact terms of your agreement.

Selling with a Home Reversion Plan

If you have entered into a home reversion plan, selling the property is more complex. In this case, you do not own the entire property outright, or you may not own it at all if you sold 100 percent of the value to the provider. You still retain the right to live in the property under a lifetime lease, but if you wish to sell, you will need to involve the provider as co-owner or sole owner.

The proceeds of any sale will be split according to the ownership structure agreed in the original contract. You will not receive the full market value, and your ability to relocate may be limited unless you and the provider agree on a suitable replacement property or a way to end the agreement.

Home reversion plans offer less flexibility than lifetime mortgages when it comes to moving house. If you anticipate wanting to move later in life, this is something that should have been considered at the outset. However, even with a home reversion plan, it may still be possible to sell if all parties are willing and the right conditions are met.

Getting Advice and Exploring Your Options

Selling your home with equity release in place is possible, but it is important to approach the decision with full knowledge of the financial and legal implications. Before making any decisions, you should contact your equity release provider and a qualified financial adviser who specialises in later life lending. They will be able to explain your options, calculate any early repayment charges and help you understand how much equity, if any, you are likely to walk away with after the sale.

If you are planning to downsize or move to be closer to family, make sure your new property fits your lifestyle needs and is acceptable to your lender. If you are considering repaying the loan and exiting equity release entirely, you will need to factor in the total repayment cost and how it affects your broader retirement finances.