Many people take out equity release plans in later life so that they can benefit from some of the value locked up in their properties, without having to move to a smaller and less expensive home.
Normally, the money obtained from equity release is only repaid when customers die or move into long-term residential care. But what happens if you want to move house after you have taken out an equity release plan; for example, if you need accommodation more suitable for your needs as you get older?
In most cases you should be able to transfer your equity release debt to your new home as long as your equity release provider is happy that the property you’re moving to offers enough security for the money you have borrowed.
Different equity release schemes
How the transfer of equity release works depends on what type of scheme you have signed up for. If you have a lifetime mortgage, you borrow money against the value of your property and then repay this capital, plus interest, at the end of the deal. If you want to move house, your provider should be able to transfer the debt to the new property.
However, if the new home is worth less than your old one, the provider may decide that it is not willing to lend quite so much against it, so you may have to repay some of your equity release loan early.
With a home reversion scheme, you have sold a share of your home to the provider. If you move to a less expensive house or flat, the provider may require its share in the new property to be increased proportionately so it has the same current value as its share in the original home.
For example, say you have sold a 40% share in your home to a home reversion company, but then decide to sell it for £200,000 and move to a house that costs £160,000. The provider could say that it will require a 50% stake in the new home to maintain the £80,000 value of the original share.
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Types of property
You will only be able to transfer your equity release deal to a new property if it meets the standards laid down by your provider.
Typically, equity release companies do not lend on retirement homes, and there may be restrictions on the type of flat you can move to as well as how the property was constructed.
Check before you sign
Even if you’re not expecting to move, it is well worth checking with any provider in advance to see what their policy is on being able to transfer an equity release deal to a new property.
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