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Can I sell my home if I have released equity?

View profile for Zoe Fellows
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Releasing equity could be the right option for you if you are looking for an injection of funds; however you should be sure to research and seek the right advice so that you choose the optimum plan, particularly if you are considering moving property in the future.  While equity release does not commit you to staying in your property, the various plans available may have certain restrictions on the types of properties you can move to. Zoe Fellows, Equity Release specialist, explains more here about equity release and whether you can move once you have released equity.

Before you sign up to an equity release plan, it is a requirement to seek both financial and legal advice to consider all of the options open to you. One of the reasons for this is to discuss your future plans as to whether it’s likely you’ll stay in your property. You may be looking to release equity to make renovations, in which case it is unlikely you would be looking to move. If you do wish to have the flexibility to transfer your loan to another property, you should ensure the plan and provider you choose allow you to do this.

Most plans have been adapted over recent years to allow the option of downsizing without penalty, but there are a number of factors a lender will consider before agreeing to a transfer of the loan:

  • The value of the property you’re looking to purchase – if the property is valued at less than your current property, the lender may be reluctant to lend against it. 
  • The type of property – some lenders may not be willing to lend against certain types of properties, for example a listed building or a retirement home. We would always advise that you get a valuation of the property ahead of making any financial commitment.
  • The plan you used to release equity – under a lifetime mortgage, you borrow against the value of your property and then repay this plus the interest.  If moving house, your provider may allow you to transfer the debt to the new property. Alternatively, if you have used a home reversion scheme, where you have sold a share of your home to the provider, if you move to a less expensive property, they may require their share of the property to be increased so it has the same value as your current property.

What is downsizing protection?

While most people who release equity will repay the loan when they pass away or move into long-term residential care, you may find that your needs change and you require more suitable accommodation. Approximately 45% of equity release products now offer downsizing protection which means you can downsize and repay your equity release plan in full without incurring early repayment charges. Without this protection, you could be liable for hefty early repayment charges if you do downsize and are required to repay some of the loan early.

Why is equity release so popular?

“83,000 people used equity release in 2018 to release £3.94billion of housing wealth according to the Equity Release Council, and that figure is expected to continue to grow,” explains Zoe. “Long gone are the days of uncertainty around the equity release market and concerns of negative equity, and in its place are robust security and protections to make your equity work for you. Most people choose equity release as it allows them to stay in their home while having access to those funds.

“When taking out an equity release plan, the likelihood of you moving in the future is one of the considerations you should look out for, and we can advise on these types of unforeseen enquires that may arise due to our experience. We are also a member of the Equity Release Council, and so by coming to us you can rest assured that we will act with your best interests in mind for you and your family.”

To find out more about equity release, you can contact Zoe on 01329 288121 or email zoefellows@warnergoodman.co.uk.  Alternatively, you may also find the following resources useful:

ENDS

This is for information purposes only and is no substitute for, and should not be interpreted as, legal advice.  All content was correct at the time of publishing and we cannot be held responsible for any changes that may invalidate this article.