As we enter retirement and begin adjusting to a new way of life, we can begin to notice how our once thriving family home now feels empty once the children have fled the nest, or the running costs of our home don’t quite suit our retirement income. Whether you’re looking to downsize to something more manageable or purchase the property you’ve dreamed of, you still might be able to make this happen with an equity release plan.
Equity release products can help homeowners unlock their property’s value through mechanisms like lifetime mortgages, providing flexible financial solutions to manage wealth as they age.
Can I move house with an equity release plan?
Yes, you can move home if you have an existing plan from an equity release provider. This can usually be repaid when you move or transferred onto your new home.
If you have a plan approved by the Equity Release Council, you’ll have the right to transfer your equity release loan to your new home. The Equity Release Council also guarantees that you will be able to transfer equity release plans without a financial penalty if you move to a property that meets the lender’s criteria (the value and construction of the property are key factors here). Understanding the lending criteria is crucial, as lenders may refuse to approve a property if it doesn’t meet their established guidelines. As members of the Equity Release Council, Bower Home Finance will only recommend their approved plans.
If you’re planning to purchase a less expensive property than your current home, then you may have to repay part of the outstanding loan, provided you transfer the mortgage to the new property.
Whether you have an existing equity release product and are looking to move home, or you’re planning ahead and considering the pros and cons of equity release for the future, our specialist equity release advisers are on hand to answer any questions you might have.
Reviewing your existing equity release plans
If you’re considering moving to release additional equity from your home, our advisers can assist in reviewing your existing plan. Reviewing various equity release schemes can help find a more suitable plan tailored to your needs. Whether you’re looking to learn more about releasing further funds or transfer to a different product, our specialist advisers offer no-obligation advice.
At Bower Home Finance, we have helped many new clients review their existing plans and where they are no longer working in their best interests, we have found them a more suitable plan. If you would like to explore this option we can offer a free, initial no-obligation chat to discuss your options. Get started today and request a callback today to learn more.
How does equity release work when selling a house?
Selling a house with equity release is possible, but you’ll need to discuss your options with your equity release adviser first, they will be able to discuss your options and the implications of each decision on your personal circumstances.
If you’re looking to sell your home without purchasing another property, you will be obligated to settle your equity release debt with the sale proceeds. This will include the initial loan amount, any interest that has accrued over time, plus any early repayment charges stated in your equity release agreement.
If your equity release scheme is a home reversion plan, your provider will reclaim the percentage of the home you sold to them at market value, and you will be free to use the remainder as you wish.
However, if you are looking to move home with equity release, you’ll have a few options including transferring your equity release plan, or repaying your current lifetime mortgage and taking out a new loan.
Transferring your equity release plan to another property
One of the options when moving home with an existing plan includes transferring it over to your new property. Also known as ‘porting,’ you will only be able to transfer your existing loan if your property meets the provider’s lending guidelines and you fulfil all equity release obligations.
If your new house has a lower value than your current residence, your existing lender may ask you to repay some of your loan.
Repaying your current loan and taking out a new one
One way to transfer existing equity release is to repay your current loan and take out a new one on your next property. The funds to repay your previous equity release plan typically come directly from the proceeds of the sale and include the original loan amount plus any interest that has accrued over time.
Your new plan is likely to have a different interest rate, but your equity release adviser will compare providers and plans, including equity release interest rates, to see if there’s a better option elsewhere. If a new plan is presented to you, your adviser will discuss the impact on your circumstances through a personalised illustration.
What happens with equity release when you move house?
In most situations, you’ll be able to transfer the existing loan from your previous property to the new one, and the conditions of the equity release scheme may stay unchanged, however this is subject to the new property being accepted by the lender.
What are the costs of releasing equity from your home and selling it?
The costs associated with moving house can be expensive and should be weighed up within the decision to move. Initial costs for a house move can include:
- Removal fees
- Estate agent’s fees
- Surveyor’s fees
- Legal and conveyancing fees
- Stamp duty
When taking equity release, it’s important to consider the financial implications, such as potential loan repayment triggered by selling your home, and the strategic approach of combining it with a new home purchase to minimize legal costs.
However, once the initial expense of moving house has been considered, over time, you could make significant savings in running costs. A large sum of money can potentially be saved by moving to a less expensive area. Energy bills can be significantly cheaper in a smaller home and you could get a cheaper council tax band.
When it comes to moving house with equity release, there can be a few more initial fees to add onto your standard moving costs including:
- Early repayment charges if you pay off your existing loan
- Advice fees
- Solicitor’s fees
What are the potential risks of selling a house with an equity release plan?
If you’re considering selling your home as with most decisions, there are risks and benefits to weigh up. These can include:
- Your property value may decrease if house prices have fallen, resulting in lower equity to pay off your lifetime mortgage.
- Interest on your loan can grow quickly, meaning you will need to take this into consideration if you wish to pay your loan off.
- There may be costs involved with paying off your existing equity release loan and setting up a new one.
- You may end up with less value in your home to leave your family or chosen beneficiaries when you die.
What is downsizing protection?
Downsizing protection is a feature in some equity release lifetime mortgage plans that allow homeowners to repay their loan without early repayment charges if they downsize to a property of a lower value.
This protection not only offers flexibility, but ensures homeowners are not financially penalized if they need to move to a more manageable home or reduce their living costs with a smaller property. Some lifetime mortgages will also include a downsizing protection feature which allows you to repay your plan in full without any early repayment charges if you move to a smaller property.
You can take out a new plan on your new property, which may have a different interest rate and terms. This option may be more suitable if your existing plan is no longer competitive or if you want to release more equity.
Your financial adviser will discuss your circumstances in detail and offer guidance about what options are suitable for you.
Speak to an equity release adviser today
At Bower Home Finance we offer “whole of the market” professional advice, this means we’re not tied to any specific providers, so we can find the best plan for you taking into account all the different lending criteria. During a free, no-obligation initial consultation, we’ll take the time to explain the advantages and disadvantages of equity release products. This includes how the money released reduces the amount of inheritance you leave. It may also affect your entitlement to some state benefits.
If you are over 55, own your own home and would like a review of your existing mortgage or equity release plan, request a callback from our team today.
Frequently asked questions
Do you still own your home if you take out equity release?
If you have a lifetime mortgage, an equity release plan will enable you to retain ownership of your property. With a lifetime mortgage, you will maintain ownership rights to your home, apartment, or property, and you reside there with guaranteed rights of residency until your passing, or until you enter long-term care. With a home reversion plan, you own the proportion of the property not sold to the equity release company in exchange for the cash amount received and again you have guaranteed rights of residency.
For further information or if you have any questions, please feel free to get in touch on 0808 169 8316. Alternatively, you can request a callback, send us an email, or message us through the live chat on our website.
Did you know that lenders may allow moving house with equity release? This is because nowadays, some plans have the facility to ‘port’ your plan with you.
Can you release 100% equity from your home?
The maximum borrowing limit achievable through equity release will depend on your age and is capped at around 60% of your home’s appraised value for someone in or around their eighties. However, as mentioned the precise amount is contingent on variables such as your age, your health and lifestyle, and other factors that a qualified adviser will be able to inform you. In the same way you can gain more money from a pension annuity, if you have certain health conditions, or certain lifestyle choices such as smoking, you will be able to release more money from your property.
Can you sell a house if you have taken equity release?
It is possible to sell your home when you have an plan in place. Nevertheless, it is important to be aware that with an equity release mortgage it will need to be repaid from the proceeds of the sale, and settling the outstanding equity release loan will involve repaying all the loan plus any accrued interest and any early repayment charge that may be applicable. With a home reversion plan, the property can be sold and the percentage of the property that you own will be paid out to you from your legal representative on sale.
Can I use equity release to buy a home?
Looking to move up the property ladder in later life? If you do not already have an equity release plan and want to move to a more expensive home or location, then you may be able to use equity release to assist with the purchase. Our highly experienced advisers could help you to raise the additional cash required to complete the sale.
You can also use equity release to purchase a holiday home abroad or a second home. This will be under the proviso that your existing property remains your main place of residence.
