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Can you sell your house if you have equity release?

Can you sell your house if you have equity release?
Pete Mugleston

Author: Pete Mugleston - Mortgage Advisor, MD

Updated: July 25, 2022

Selling your property while you currently have an equity release plan in place can be an added complication, but that doesn’t mean you can’t go ahead with the sale.

There are solutions to resolve this, which we will go through here…

Releasing equity

Equity release plans or lifetime mortgages enable you to release some of your home’s value as a tax-free loan that doesn’t usually need to be repaid until you die or move into long-term care.

Once you have an equity release plan in place, you will likely now need the permission of your lender if you decide to sell the property; this is if you choose to move within the term of your plan.

Although most standard plans will allow you to move your mortgage to a new property without too much added hassle.

It is important to bear in mind that if you intend to get a mortgage on a house that is far less expensive than your existing property, the lender may be less inclined to lend against it.

In this case, you may need to repay some of the mortgage early which could lead to early repayment charges.

Early repayment charges

If you choose to sell your home while you currently have an equity release plan in place, this may result in you having to pay early repayment charges to finish your mortgage agreement early.

Other scenarios which result in early repayment charges include if you make any overpayments above the limit of your mortgage deal or if you transfer to another mortgage deal or onto a standard variable rate.

There is the possibility of being able to avoid the early repayment charge by mortgage porting, however.

In this scenario you would take your current deal with you to your new property, although you would need to confirm with your lender whether this is something they will consider.

Flexibility

Within this area of the market, products are becoming increasingly flexible, with features such as receiving monthly income from your property wealth now available.

This in turn allows you to make interest payments over the course of the loan and also allows for downsizing in the future.

The Equity Release Council has pushed through changes to increase the flexibility of equity release products amongst lenders and assist the market in becoming fully regulated.

Downsize protection

If you’re looking to downsize in the future, downsize protection will allow you to repay your equity release plan in full.

With downsize protection you would be able to move home and repay the mortgage in full without incurring any penalties. Without this, a lender may deem your new property unacceptable if it is a high rise flat or log cabin, for example.

Fewer than half of equity release plans come with downsize protection, and the ones that do often include a higher rate.

However, if you do intend to move property within the agreed term of your equity release plan, then it would be wise to consider downsize protection, which is something an equity release broker would be able to provide advice on.

FCA disclaimer

*Based on our research, the content contained in this article is accurate as of the most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs.

Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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