Can I sell my house if I have equity release?
Releasing equity from a home is becoming an increasingly popular way to give older couples some cash if they need it.
However, it's less known what happens if you then decide to sell up and move home.
In this blog we take a look at how you can still move house if you've released equity from your home, and how best to go about it.
Moving with an equity release plan in place
Releasing equity from your home doesn't permanently fix you to that property, but it can make things more difficult if you do decide to move.
Fortunately, a lot of equity-release plans do let you transfer your loan to a different property, but this requires the lender to allow it first.
If the place you want to move to is much cheaper than where you are now, the lender may not be willing to let you borrow as much against it.
If you find yourself in this situation, you could end up paying early repayment charges while trying to repay some of your loan early.
Managing Director at Responsible Life, an equity-release specialist, Steve Wilkie said:
"The new property must meet current lending criteria. In reality, current lending criteria are quite flexible and would be explained to a customer at time of purchase. If you have any plans to move to an unusual property in later life, flag this to your adviser who will advise accordingly."
There are some homes which are harder to sell on the open market and therefore equity-release providers may not want to accept them. An example of these are retirement homes.
Types of equity-release plans to choose
You can release some of your money from your property through equity release plans like a lifetime house repayments. The amount of money you release gains interest over time and is usually repaid, along with the released value, when a person dies or enters long-term residential care.
In 2018, we saw a record in the number of people releasing equity - 83,000 people released a total of £3.94 billion. This figure was provided by the Equity Release Council.
Nowadays, you'll find that there are more and more flexible equity release plans out there. There are further options in terms of features with them as well. Popular plans allow monthly income from your property, where you can make interest repayments regularly and choose to downsize with no cost if you choose to.
If you are thinking of downsizing in the future and you haven't released equity from your property yet, you may want to look in to downsizing protection as a feature of a plan.
The benefit of having downsize protection in an equity-release plan is that you can repay the amount you released in full without any early repayment charges.
Fortunately, nearly half of equity-release plans offer this downsize protection, and there's usually a timescale in which you can use it of the first 5 years.
Talk to a professional
If you're thinking of going ahead with equity release, we recommend you always talk to a professional first.
Also ensure that any lenders you are considering are approved by the ERC. This protects you from things like owing more than your property is worth.