Equity Release is a godsend for over-55s who want to stay in the house they love instead of having to downsize in order to release some of the capital tied up in it.
But none of us has a crystal ball. We don’t know what the future holds and how our plans may change.
So, what happens if you have taken out an ER loan and later want to move house?
The good news is this is not an ‘either, or’ situation. Your ER loan will be portable after one year, meaning you can take it, or a portion of it, with you to your new home.
However, as you would expect, there are some conditions attached. Here’s what you need to know:
- Providing that your ER lender upholds the standards of the Equity Release Council (www.equityreleasecouncil.com), your loan will be portable.
- If you decide to move house before your loan becomes portable, there may be an early repayment charge to pay. The rate of this charge varies between lenders. It could be as little as 5% or as much as 25%. Your adviser can give you more detail about your options long before you commit to taking out equity release.
- The amount of ER you are loaned is based on a percentage of the value of your house – and the same loan-to-value (LTV) ratio will be applied to your new house if you want to move. In simple terms, you may have a loan of £200,000 while you are living in a house worth £1million. But if you then downsize to a house worth £500,000, you will only be able to take £100,000 (half the value) of the loan to the new property. The remaining £100,000 will have to be repaid to your lender – but this is done without penalty.
- Not all properties qualify for ER. Some are deemed harder to sell on, and therefore a higher risk to your lender – and you may not be able to get the ER loan that you want. Your current house may meet all the lender’s criteria for ER. But, if you later plan to move, the new property will also have to meet the same standards before you are permitted to take your ER (or a proportion of it) with you.
- If you want to move to a property that fails to meet your lender’s criteria, you will not be able to take your ER with you and must now repay the loan in full. Providing you have lived in your house for at least five years there will be no redemption fees to pay – you will just have to repay the loan and any interest due on it.
- You also have the option of selling your current home and moving elsewhere without transferring your ER loan – and repaying it instead – even when you are moving to a property that your lender would be happy to lend ER against. However, depending on the terms of your loan and how long you have had it, you may have to pay an early repayment charge if you do this.
- If you think you may want the option of moving house within the foreseeable future, flag this up with your adviser. They can help you find the most appropriate loan for your needs. The Equity Release market is flexible and growing and there are many different options available.
- Remember: Equity Release is sometimes referred to as a Lifetime Mortgage. It is essentially long-term planning. But things change, and if you wish to move house – or if you have to move – you have options. Start your ER journey by evaluating what you want, thinking about what may change in the future, and speaking with a good adviser.If you’d like to find out more, please get in touch mwade@accessequityrelease.com; 020 3840 5011
