A concern for many people considering an equity release plan is whether it will tie them into remaining in their current home for the rest of their lives. As most equity release plans are developed to be long term arrangements, this can be an issue for people who may believe that it will inhibit their ability to move home as their future situation or health dictates.
The good news for those considering an equity release plan is that most lenders hold membership of the Equity Release Council, abiding by its rules which include allowing customers to move to a ‘suitable alternative property’. A ‘suitable alternative property’ is described as a home they would normally accept if they were setting up an equity release plan for a new customer at the time of the move. This may limit the choice of where you move to a little, but usually most people will find something fitting their requirements and those of the lender.
In most circumstances, you will simply carry over the loan from your old property to the new one and the terms of the equity release plan will remain the same. If you have a lifetime mortgage and you want to move to a property with a lower value then the lender may require a partial repayment of the loan to keep it within its lending limits at the time; however, the lender cannot impose any early repayment charge which may be a feature of your plan.
If instead you are moving to an acceptable property of higher value, then there will be no payment to make and the lender may even consider an application to increase the loan amount, helping to cover some of the additional financial outlay.
Whether you are looking to move to a different location or downsize your home, the terms of the equity release plan will allow you to make the move. However, if your situation changes or your health deteriorates, requiring you to move into long-term care, the equity release plan will come to an end. The sale of the house will then be used to pay off the debt owed to the equity release plan lender.
You may wish to repay the lifetime mortgage on moving home, in which case check if your plan has any early repayment charges included. Some plans have low fixed early repayment charges, whereas other can vary and be a high percentage of the money borrowed. A small number of lenders will completely waive any early repayment charges on moving after a certain period of time, so you should always carefully check the terms of your loan.
Equity release plans are not the best solution for some situations and parties, so it is always important to undertake substantial research before committing to a product. Additionally, it is advisable to seek the assistance of an experienced professional who can help you identify the benefits, risks and processes attached to releasing equity from the home.
Equity release may involve a lifetime mortgage or home reversion plan. To understand the features and risks, ask for a personalised illustration.
The Age Partnership team can help answer any questions you may have about releasing equity from your home. For more information, visit their homepage or call their dedicated team today on 08080 555 222.
Age Partnership provide advice for free and without obligation. Only if you choose to proceed and your case completes would a typical fee of 1.7% of the amount released be payable.