Can I sell my house if I have an Equity Release plan?
Lifetime mortgages are portable from property to property. But it might not be a straightforward exercise.
There may be many reasons for moving home once you have an Equity Release plan. After all, the minimum age to start one is usually 55 and it would be odd to make a decision that commits you to stay in one place for possibly the next 40 years or more.
However, moving house when an Equity Release plan is involved brings with it some additional things to think about.
The main issue is the type of property you are thinking of moving to. When you first took your plan, all you were probably interested in was the eligibility of the property you were living in. Although eligibility criteria for all property was in the paperwork given to you at the time, it was only your existing property you were interested in. Once you start thinking of moving, this information becomes a whole lot more important.
Property Eligibility Rules
All plans have their own eligibility rules. From the type of construction and age to the location and value, each plan may have its own preferences.
That is not to say that if the property does not meet these rules there is anything wrong with the property. It does mean though that transferring the Equity Release plan becomes a headache if your existing plan won’t accept your chosen property. A headache with only three options:
1.You don’t move
2. You move and repay the Equity Release Plan, or
3. You move, but have to find a different Equity Release provider. One that likes your new property.
One of the more common situations is a move into a warden assisted property or something similar. These properties are usually leased as opposed to freehold and as such rules regarding the length of the lease will be important to any lender.
Some providers may consider leases in excess of 75 years, others well over 100 years. They can even refuse them outright.
It may be possible for you to extend the length of the lease on the property you are buying. A good solicitor will advise you what is and isn’t possible and and talking to one as early as possible about this will save you time and, quite possibly, money.
It is not only the Equity Release provider that has influence. It will be a condition of your loan that the property is properly insured.
If the insurer doesn’t want to insure, because of the location, flood risk, construction or any of many reasons, then you will be faced with further problems. It may also be that the insurer will insure, but their conditions or cost is not to your liking.
To save a lot of potential problems, get an insurance quote on the property you would like to move into as soon as is practical. If the quote you receive is on standard terms then you can proceed with confidence.
Check the new percentages
The maximum amounts you can take from an Equity Release plan are dictated by age and the value of the property. Logically, you are going to be older than when you first took your plan, but you still need to look carefully at the at the amount of borrowing you wish to take on the new property.
You may take advantage of being older and take a larger percentage from the property. But, if the value of the property is lower than the one you are moving from then, even with a larger percentage of the value available to you, in cash terms you may find that you are repaying some of the original loan from the sale of your property.
Whatever your plans, you need to look at the amounts involved very carefully as there maybe penalties involved in repaying some of the amount borrowed back again.
What you should consider before committing yourself to moving house:
1. Look at your existing terms and conditions
Your existing provider would have included information about what is and isn’t possible regarding moving house in the original paperwork you were given. If you can’t lay your hands on the appropriate documents, don’t worry – just give them a call and ask to be sent a copy.
2. Talk to an adviser
An experienced and qualified adviser will be able to answer any questions you may have; you do not have to go back to the original adviser you used if you do not wish to.
With over 20 years experience and access to all the providers in the Equity Release market, South West Equity Release is ideally placed to do all the necessary research on whether switching your provider is a good idea for you. Free and without obligation.
3. Check the eligibility of the new property
Find out as much information as possible about the property you want to buy before you take the idea too far.
The value, construction, whether it is freehold or leasehold, location, and an idea of the condition are the basic things you need to know.
4. Find out the insurance situation
It is a condition of any Equity Release plan to have your property adequately insured.
Get a quote early on in the process to ensure that you don’t experience any unpleasant surprises.
5. Look at all the costs
Moving home is an expensive business. If you have an Equity Release plan you may have to factor in even more costs.
As well as the legal costs, you need to find out if there will be any additional administration fees, early repayment penalties, and whether the terms of the new Equity Release plan are better or worse than your existing one. Make sure you find out all the costs and penalties before you commit to your move.
6. Consider changing your provider
Moving house could give you the incentive to shop around and look at what different providers are offering.
Interest rates and your circumstances could have changed since you first took your plan out. Click here to find out more about how to change providers.
To understand the features and risks of a Lifetime Mortgage, please ask for a peronalised illustration