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Can you move home with equity release?

Move home with equity release

This question is often asked by people considering equity release and is certainly something to consider before making a decision.

In this article, we will answer this question and give you some top tips on moving or selling your home if you have equity release.

What is equity release?

Equity release is used by those that want to access some of the value locked up in their home without having to move to a smaller or less expensive property.

This could be to have a more comfortable lifestyle, finally have that dream holiday, or help a family member buy their first home. The reasons are endless and entirely different for each person.

The two main types of equity release are a lifetime mortgage (the most common product) and home reversion.

A lifetime mortgage is aimed at homeowners aged 55+ and allows the release of up to 60% of the equity in the home. This can be received in one lump sum or smaller instalments over a period of time. And, you will never go into negative equity.

Once the house is sold, the family or estate will receive the total balance minus the remaining loan.

One of the main reasons this is the most popular equity release product is because you will still own your home.

Home reversion is quite different. It’s aimed at homeowners aged 60+, and the equity is released by selling a share of your home. In return, you receive a tax-free cash lump sum or regular income payments and a “lifetime lease”, a promise that you can stay in your home for as long as necessary.

When the home is no longer needed – either because of long-term care or the homeowner passes away – the house is sold, and the family or estate will be given the homeowner’s share of the proceeds from the sale.

Can you move or sell your home with equity release?

The short answer is yes. You can move or sell your home even if you have a lifetime mortgage or home reversion. All equity release plans approved by the Equity Release Council allow you to move whenever you like. Bower recommends that you always ensure the Equity Release Council covers the product, and the advisor and provider is a member of the Financial Conduct Authority. 

There are some differences in moving or selling your home, depending on whether you have a lifetime mortgage or home reversion.

Moving or selling your home with a lifetime mortgage

Let’s look at selling your home first. If you come into a substantial amount of money – maybe you sold an asset – then you can pay back the loan amount and any interest charges and end the equity release agreement.

When you move home, you have two options. You can transfer your existing lifetime mortgage to a new property (often referred to as porting), or you can pay off your existing loan and start a new plan on your new home.

Either way, moving home with a lifetime mortgage is quite similar to setting up equity release in the first place.

You will still need to speak to a financial advisor, and they will be able to give you the best advice and offers available.

Regardless of which path they recommend; your equity release advisor will provide you with a Key Facts Illustration (KFI) from the provider.

One thing to be aware of, if you choose to move to a property with less value than your current property, you may be required to pay back some of the lifetime mortgage. This is because the lender now has less security in your new home.

When you might not be able to transfer your lifetime mortgage to a new property

Lenders are becoming more and more flexible when it comes to equity release; however, some properties may restrict you from transferring your lifetime mortgage. These include but are not limited to:

  • Age-restricted properties (e.g. over 50’s retirement homes)
  • Leasehold properties with short leases remaining
  • Properties with a high risk of flooding
  • Properties that require significant renovation
  • Properties made of non-standard construction

However, your financial advisor will be able to talk you through these restrictions.

Moving or selling your home with a home reversion plan

Moving or selling your home with a home reversion is somewhat different as you no longer own the whole property.

Firstly, you will need permission from the provider to transfer the home reversion to a new property and depending on the property’s value, the provider may want to adjust their share of the home.

Our top tips

Always get expert advice

When getting financial advice on this subject, always use an advisor that’s a member of the Equity Release Council and is Authorised and Regulated by the Financial Conduct Authority (FCA) to ensure you get the best, most legitimate advice possible.

Read the small print

This may seem obvious, but you’d be shocked how many people don’t, and it’s especially important when thinking about things such as early repayment charges.

Make sure you understand everything

Don’t be embarrassed about asking your financial advisor to explain things more than once, and ensure you know the pros and cons of both lifetime mortgages and home reversion.