Can I Move House if I Have Equity Release?

“Are you curious about equity release and whether it allows you to move house? You may have many questions and worries, but rest assured that you’re in the right place for answers. Each month, over 7,000 people seek advice from our website about equity release. This article will clearly explain:

• What equity release is and how it works.
• The factors that can affect your ability to move house.
• The possible risks of equity release.
• How to move house if you have an equity release.
• Why your new property might not be suitable for equity release.

We understand that the world of equity release can seem tricky. But don’t fret; we’re here to simplify things for you. Our expertise is based on offering guidance to many people just like you, so we understand your concerns.

Together, we’ll navigate the process of equity release and moving house, making it less daunting for you.”

Let’s dive in.

Equity release summarised

Equity release plans are used by senior homeowners – at least 55 years old – to borrow against the value of their residential property. These plans allow them to borrow up to significant amounts, which may not be an option in later life due to a limited remaining working life. 

The reason older homeowners can still borrow against their home equity is that these loans don’t require monthly repayments. The loan is only repaid through the sale of their residential home after:

1. The last surviving homeowner moves out of the property into long-term care
2. The last surviving homeowner passes away

There are two types of equity release plans, namely a home reversion plan and a lifetime mortgage. The latter is more common.

Can I move house If I have equity release?

You may or may not be able to move home if you’ve already taken out an equity release plan. You could be allowed to move residential properties and take the equity release plan with you to be secured by the new property. 

It will depend on:

1. The lender and if they’re a member of the Equity Release Council
2. The property you’re moving to
3. Or your willingness and ability to pay off the equity release plan first

Most lenders will allow you to move property and take the equity release plan to the new property, as long as the new property is deemed suitable. The official term for this is porting. The new property should be of the same or greater value and should be just as easily sold on the open market. 

If the lender is a member of the Equity Release Council (ERC), they automatically agree to allow homeowners to move properties with their equity release plan. This is just one of several additional assurances you get by choosing an equity release company that is a member of the ERC.

If you’re not allowed to move home and add the equity release plan to the new property, you could still move home but you would have to pay off the equity release plan first. This can be expensive and may come with additional early repayment charges. Thus, it’s not a realistic solution for many. 

Can you downsize if you have an equity release?

It’s possible to downsize to a less valuable property and take your equity release plan with you, but you might be required to pay off some of the loans in the process. 

If you have to pay off some of the loans early, you might simultaneously have to pay an early repayment charge. However, if your equity release agreement includes a downsizing clause, you should not be charged a fee for repaying some of the loans early. 

This is why it’s important to tell your equity release adviser that you have plans to downsize in the future at the very beginning. With this information, they could recommend only considering equity release products that include a downsizing clause. 

How do I transfer my equity release to another property?

Porting your equity release plan to the new property follows a similar process to taking out equity release the first time around. You’ll receive advice from an equity release adviser and the new property will be subject to an evaluation and appraisal. 

You’ll have to pay the fees for these services upfront, which isn’t typically the case when taking out your first-lifetime mortgage. 

There is potential for the equity release adviser to suggest you pay off the plan before purchasing the new property, and then take out a new equity release plan – if possible. 

Why wouldn’t I be able to transfer my equity release to a new property?

There are a number of reasons why an equity release company will deem the new property unsuitable for an equity release transfer, such as:

1. The new property has a non-standard construction
2. The new property is aged restricted (e.g. over 50s building)
3. Leaseholds with short remaining leases
4. The new property is at risk of flooding
5. The new property needs renovations to be liveable 

What happens to my equity release if I don’t transfer it to another property?

If you don’t transfer your lifetime mortgage to the new property, you will be obligated to pay it off early and cover any early repayment charges applied. Lifetime mortgages have to be repaid when you stop habitually living at the property the plan was taken out on.