Your guide to moving, selling and renting out your home with equity release

Does equity release have flexibility for moving home?

Taking an equity release plan is a big commitment. That’s why you should make sure you fully understand the implications before committing to it. ‘Can you move house when you have equity release?’ is one of the questions many people raise when taking out a plan.

In this article, we look at your rights and restrictions when it comes to moving, selling or renting out your home with a lifetime mortgage, the most popular type of equity release:

• Can you move house if you have equity release – and take your plan with you?
• Can I sell my house if I have equity release – and pay off my plan?
• I no longer need my equity release plan; what steps do I need to take?
• Can you pay off a lifetime mortgage early without penalty?
• Can I take in a lodger with equity release?
• Can I rent out my house if I have equity release on it?

We hope this guide will help you understand the issues around equity release and moving home. Our selected advisers are also available to discuss your circumstances and offer further information and advice. 

Simply call us on 0808 178 3055 or request a call back for a time that suits you, and we’ll arrange an appointment. Alternatively, check your eligibility and get an initial indication of how much tax-free cash you could unlock.

Can you move house if you have equity release – and take your plan with you?

Equity release is typically intended to be a lifetime commitment. However, lenders understand that many people in retirement decide to downsize or move closer to family. So as long as your new home meets your chosen lender’s criteria, you’ll have the freedom to sell and move house.

In fact, all Equity Release Council approved plans guarantee you have the right to move house and take your lifetime mortgage with you. This is known as ‘porting’ your plan. 

What is the criteria for porting a plan?

While the lending criteria differs between providers, all equity release plans which comply with Equity Release Council standards allow you to move house. As stated on their website: ‘You have the right to move to another property subject to the new property being acceptable to your product provider’.

This means that your new property must meet the same criteria as if you were taking out a new plan. The reason for this is that equity release providers need to make sure they can sell your home when you pass away or move into long-term care. As a result, they may be unwilling to accept properties that could prove difficult to sell.

When you are moving home, some property types that may be deemed unacceptable can include:

• A property of non-standard construction.
• Those located a short distance from commercial premises.
• Ex-council homes. 
• Properties forming part of a retirement complex.
• Studio apartments, basements flats or static or mobile homes.

But please don’t rule out taking your equity release plan with you if you want to move to one of these property types. Each provider has their own criteria, and some may accept properties that others rule out. If your new property is unacceptable, you would need to repay your equity release plan in order to move. 

Does the value of my new home matter?

In order for your plan to port smoothly to your new home, it does make the process simpler if the properties are of similar value. This does not mean that you cannot move to a smaller or less expensive home, however. 

If you wish to move to a property with a lower value than your current home, your lender may require a partial repayment of your loan. This is to keep your loan within its lending limits. 

Will I incur penalties if I move house?

As long as you select an Equity Release Council approved plan, you will be free to move house and take your plan with you penalty-free, subject to your new home meeting your lender’s criteria. At Equity Release Wise, our selected advisers will only recommend these types of plans to ensure customers receive the highest level of protection.

If your new property doesn’t meet your lender’s criteria, you may have to  pay off your loan in full in order to move. In this case, early repayment charges (ERC’s) may apply.

If you are concerned about incurring ERCs, some lenders offer protections or guarantees called ‘downsizing protection’. This allows you to pay back the loan and any accrued interest early when you move home, without penalty. For example, some lenders will waive early repayment charges if you move within three years of your spouse passing away or moving into long-term care.

At Equity Release Wise, our selected advisers are familiar with each provider’s lending criteria and charges. They can answer your questions about moving home with equity release and help you find the most suitable plan. Get started today by calling 0808 178 3055 or request a call back for a time that suits you..

Can I sell my house if I have equity release – and pay off my plan?

So what happens if you want to sell your home without buying a new one, for example to move in with your children or rent a retirement flat? Or what if you find you can repay your equity release plan in full with the proceeds of your sale and still have enough left over to purchase a new home?

In cases like this, the question ‘can I sell my house if I have equity release?’ changes slightly. You wouldn’t be moving/porting the plan to another property. Instead, you would need to pay it off altogether. 

You do have the right to sell up and pay off your equity release plan. And because of the ‘no negative equity’ guarantee that comes with plans from members of the Equity Release Council, you won’t have to worry about owing more than your home is worth.

Some plans come with penalties for repaying your plan early. There are exceptions to early repayment charges however, so you may not necessarily incur them. The terms of any plan you choose will of course be explained to you clearly during the application process and included in your documentation for future reference.

I no longer need my equity release plan; what steps do I need to take?

Equity release plans allow you to pay off your loan in full and end your agreement early at any time, should you no longer require a lifetime mortgage.

If you decide you no longer need your equity release plan, you should inform your provider straight away. They’ll be able to check the details of your agreement and tell you what you owe, including any early repayment charges that may apply.

Once your provider has approved your decision, you can repay the plan with funds you already have. Alternatively, you can sell your house and use the proceeds to pay off the plan.

Can you pay off a lifetime mortgage early without penalty?

Depending on your chosen provider and plan type, ending your agreement early could incur an early repayment charge. With some providers there are circumstances under which these fees may be waived. Here are some examples:

Just equity release. With a Just equity release plan, any early repayment charges are waived if you’ve held your lifetime mortgage for longer than the plan’s early repayment period. Just also offer downsizing protection, which enables a joint lifetime mortgage to be repaid early without penalty in some circumstances.

Canada Life equity release. Downsizing protection is available for customers who choose a Canada Life Capital Select lifetime mortgage. It allows customers to sell their house penalty-free after five years.

More2Life equity release. If you’ve decided to move home, but your new property does not meet More2Life’s lending criteria, you may be exempt from early repayment charges if you’ve had your plan for more than five years.

If you’re looking for further information on provider-specific lending criteria for equity release, you can visit our equity release providers page here or call us on 0808 178 3055 to talk to one of our selected advisers.

Can I take in a lodger with equity release?

With advance permission from your lender, you may be able to take in a lodger. This would mean renting out a room within your property to an individual who would live with you and share facilities such as a kitchen with you. This differs from a tenant, who occupies the whole property, or part of it but with their own facilities and entrance. Equity release plans tend to prohibit you from having a tenant.
 

Which equity release providers might allow me to live with a lodger?

Different lenders and plans have their own set of rules. With Aviva, for example, you are free to take out a lifetime mortgage if you already live with a lodger. This is on the premise that they don’t share the whole house with you.

This is similar to L&G, who allow you to arrange an equity release scheme with up to two lodgers already residing in your property. However, their lending criteria specifies that there must be no tenancy agreement and the lodger must share kitchen and bathroom facilities with you.

Just Retirement on the other hand requires that applications be sent for special consideration should you wish to apply for equity release whilst sharing a property with a lodger.

Can I rent out my house if I have equity release on it?

No, you cannot normally rent out your home to someone after arranging an equity release plan on it. This event would trigger the end of your plan, at which point you would have to repay the loan plus interest and any early repayment charges. 

However, if you have a buy-to-let property separate to your main residence, it may be possible to unlock some of the equity from it with a buy-to-let equity release plan. 

Talk to an expert today

After reading our answers to ‘can I sell my house if I have equity release?’ and ‘can you pay off a lifetime mortgage early?’ you may wish to find out what plan could be best for you.

At Equity Release Wise, our selected advisors will help you determine whether a lifetime mortgage is right for you. They will also help you find a flexible and potentially penalty-free option that makes selling your home with equity release as simple as possible.

Please call 0808 178 3055 or request a free call back here. Our friendly team will be able to answer your initial questions and put you through to one of our selected advisers to help you further.