Can I Sell My House If I Have Equity Release

Equity release is a popular financial solution in the UK for homeowners looking to unlock cash from their property without selling it outright. It allows individuals, usually aged 55 and over, to access the value tied up in their home through a lifetime mortgage or home reversion plan. However, life circumstances can change, and homeowners may later wish to move to a new property. This raises a common question: can you sell your house if you have equity release? The short answer is yes, but there are important rules, conditions, and financial considerations to understand before making such a decision.

Understanding Equity Release
Equity release is designed to help older homeowners access funds while remaining in their property. The two main types of equity release are lifetime mortgages and home reversion plans.

With a lifetime mortgage, you take out a loan secured against your home, which does not need to be repaid until you die or move into long-term care. Interest can either roll up over time or be paid monthly. You retain full ownership of your home during this period.

With a home reversion plan, you sell all or part of your home to a home reversion company at below market value. In exchange, you receive a lump sum or regular income and retain the right to live in the property rent-free for the rest of your life. However, you no longer own the portion of the property you have sold.

Both arrangements are regulated by the Financial Conduct Authority (FCA) and, if taken through a provider that is a member of the Equity Release Council (ERC), come with consumer protections such as the right to move home under certain conditions.

Can You Sell Your House with a Lifetime Mortgage
If you have a lifetime mortgage, you can sell your house, but you must either repay the loan or transfer it to your new property if the lender approves. Most lifetime mortgages include a “porting” feature, which allows you to move your equity release plan to another home as long as the new property meets the lender’s criteria.

When you sell your home, the outstanding loan and any accrued interest must be repaid. If you are moving to a new property of similar or greater value that the lender deems suitable, you may be able to transfer the lifetime mortgage balance to the new home without incurring early repayment charges.

If the new property is of lower value, you might be required to repay part of the loan to maintain the lender’s loan-to-value (LTV) ratio. This ensures the borrowed amount remains in proportion to the property’s value and protects the lender’s security.

Selling a Home Reversion Property
Selling a property under a home reversion plan works differently because you have already sold part or all of your home to a reversion company. If you decide to move, you will need the company’s consent to sell, as they are a co-owner of the property.

When the home is sold, the reversion company receives its agreed percentage of the sale proceeds, and you receive the rest. For example, if you sold 40 percent of your home through a home reversion plan, you would only receive 60 percent of the sale value after the property is sold.

If you wish to move to a new home, some reversion companies may allow you to transfer the agreement to a new property. However, this is subject to strict conditions. The new property must be of equal or higher value and acceptable to the company as security. If it is not, you may need to buy back the sold share or repay part of the funds before moving.

How Porting Works for Equity Release
Porting allows you to transfer your existing equity release plan to a new property when you move. Most plans approved by the Equity Release Council offer this feature, but it depends on the lender’s assessment of the new property.

For example, lenders may refuse to port equity release loans to certain property types, such as retirement flats, leasehold apartments with short leases, or homes of unusual construction. They may also reject homes in poor condition or those with limited resale potential.

If your new home is approved, the lender will simply transfer your equity release plan and associated balance to the new property. The process usually involves a property valuation and legal checks similar to those carried out when you first released equity.

Repaying Equity Release When Selling
If you choose not to port your equity release plan, the outstanding loan must be repaid when you sell your property. For a lifetime mortgage, this includes both the original amount borrowed and any interest that has accrued.

You can repay the loan using the proceeds from the property sale. Once the lender has been paid, any remaining funds are yours to use as you wish. However, if your home’s value has fallen, the sale proceeds might not fully cover the balance owed. In such cases, members of the Equity Release Council guarantee that you will never owe more than the property’s final sale value through their “no negative equity guarantee.”

It is worth checking whether your plan includes early repayment charges, as these can sometimes apply if you repay the loan early or move within a fixed period after taking out the plan.

Practical Example of Selling with Equity Release
Consider a homeowner in Sussex who took out a lifetime mortgage at the age of 65 to release £60,000 from their home valued at £300,000. Ten years later, they decided to move closer to family. Their home had appreciated to £400,000, and the outstanding loan, including interest, was £95,000.

When they sold their home, they used part of the sale proceeds to repay the lender in full. They were left with £305,000 to purchase a smaller property. Alternatively, if they wished to move the mortgage to a new property, the lender would have assessed whether the new home met its criteria for porting.

In another case, a couple in Manchester had entered a home reversion plan, selling 50 percent of their property for £100,000. When they moved, the property sold for £350,000. The reversion company received £175,000 (50 percent), while the couple received the remaining £175,000 to purchase a smaller property.

Important Legal and Financial Considerations
Selling a home with equity release is a significant financial decision that requires legal guidance. The terms of your plan will determine whether you can move, how much you owe, and whether charges apply. Always consult your financial adviser or solicitor before making any commitments.

If you have a lifetime mortgage and wish to move, it is essential to confirm whether your plan is portable and whether the new property meets the lender’s requirements. If not, you may have to repay the loan in full, which could limit your options for purchasing another property.

If you have a home reversion plan, remember that you do not fully own the property and cannot sell it independently. The reversion company’s consent is required, and they will receive their agreed share of the sale proceeds.

Potential Pitfalls When Selling with Equity Release
The main challenge when selling a property with equity release is ensuring that your new home meets the lender’s or provider’s criteria. Some homeowners discover that certain property types are not accepted, which can limit where they can move.

Another common issue is the early repayment charge. If you repay your equity release plan too soon after taking it out, the fees can be substantial. This is particularly relevant for homeowners who release equity and later decide to downsize within a few years.

You should also consider how selling your home and repaying the equity release loan might affect your financial position, especially if you plan to buy a new property. The amount left after repayment may not always be sufficient to fund your next purchase, depending on the growth of your property’s value.

How to Prepare for a Sale with Equity Release
Before putting your property on the market, contact your lender or plan provider to discuss your options. They will outline the process, confirm any fees or restrictions, and explain whether your plan can be ported to a new home.

It is also advisable to obtain an up-to-date statement of your outstanding balance so you know exactly how much needs to be repaid upon sale. A professional valuation of your property can help you estimate the potential proceeds and plan accordingly.

Your solicitor or financial adviser can assist with communication between you, your lender, and the buyer’s representatives to ensure the sale and repayment are handled smoothly.

Conclusion
Yes, you can sell your house if you have equity release, but the process depends on the type of plan you hold and your lender’s policies. With a lifetime mortgage, you can usually move by either porting your plan to a new home or repaying the loan when you sell. With a home reversion plan, you will need the provider’s consent, and they will receive their share of the sale proceeds.

It is important to plan carefully, seek professional advice, and understand all financial and legal implications before making any decisions. With the right guidance, selling your home with equity release in place can be managed effectively, allowing you to move or restructure your finances while maintaining long-term stability.