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Can I sell my house if I have equity release?

Find out how selling your house with equity release can be accomplished using the right strategy. 

Summary 

  • Selling a house is possible even after releasing equity from your home.

  • The type of equity release scheme you use will influence how your house gets sold.

  • Selling a house with equity release has pros and cons, and you may want to consider alternative options.

  • Unbiased can help you find a mortgage broker that specialises in equity release.

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What is equity release?

Releasing equity from your home is an effective way to access some of its value, but it’s worth taking financial advice beforehand to make sure it’s right for you.

Equity release refers to a process in which a homeowner gains access to some money tied up in their property. This option is usually only available to people over the age of 55. 

For example, let’s say a 60-year-old retired homeowner wants to offer some money to their grandchild, but it is tied up in their property.

They might use equity release to release some equity for this. According to SunLife, the amount of equity released generally falls between 20% and 60% of the property's value.

With equity release, a person is essentially taking out a loan against their property. It is money they would have already put into buying the property, which also means it is tax-free.

Can I sell my house if I have equity release?

Yes, you can sell your house if you have equity release.

Equity release products, specifically lifetime mortgages, can be repaid at any time and by any means.

This gives homeowners more flexibility regarding how they repay their mortgage, even when selling and moving, but early repayment charges may apply.

Other points need to be considered. For instance, there are fees associated with selling a house with equity release.

Equity release interest rates and fees vary on average between £1,500 and £3,000, depending on the lender, although some may cap their fees.

An equity release is often repaid when the property is sold, the owner goes into care or when they pass away.

This means funds are recouped from the person's estate rather than repaid as a traditional loan.

Why would I sell my house with equity release?

There are many reasons why people might consider selling a house with equity release.

These include:

  • Downsizing

  • A need for change

  • An increase in the property’s value

How does equity release work when selling my home?

If you are a homeowner over the age of 55, you will likely qualify for equity release.

However, the amount of money you can access through this scheme depends on your age, your property’s value, and your credit history. 

When you are selling your home and want equity release, the most important factor to consider is whether you are opting for a lifetime equity release mortgage or home reversion equity release.

With a lifetime mortgage, you receive the money in a lump sum. 

With a home reversion plan, you receive the money in several instalments.

If you are selling a house with equity release, you may do so, but the options for which home you can buy will be limited.

For example, you may only have the ability to purchase homes under a certain amount or properties that need to be renovated.

This is due to the decreased property value that the equity release facilitated.

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Can I take my equity release loan with me?

You can take your equity release loan with you after you sell your property, but it is dependent on your loan contract and whether the new home is suitable for that loan.

The lender will have to confirm they find value in your new home that matches your equity release mortgage. This will ensure that the surety for the loan amount stands.

Why might my provider reject my equity release plan?

In some cases, a financial adviser or mortgage broker might reject or advise against releasing equity from your home, especially if you want to sell it.

Some of the most common reasons this might happen include failing a credit check or not holding enough equity in the property. 

You cannot challenge an equity release rejection. However, you can inquire about the specifics of why it was rejected and take action to improve your application next time.

The best ways to do this may include paying off existing debt, achieving a higher credit score, or re-applying with the help of a co-borrower with a strong credit score.

What are the pros and cons of selling a house with equity release?

There are advantages and disadvantages to selling a house with equity release.

Understanding the pros and cons can help you make an informed choice when the time comes.

The pros of selling a home with equity release

  • You gain access to tax-free cash.

  • If you are downsizing, the limitations on future property purchases won’t be an issue.

  • With a lifetime mortgage, you may be able to reduce the amount of inheritance tax due.

The cons of selling a home with equity release

  • The value of your property is decreased, which can make it hard to resell.

  • Limitations on future purchases can be difficult to navigate.

  • If your application is rejected, selling your house with equity release can take time.

Are there any alternatives when selling a home with equity release?

Equity release challenges should not stop you from selling your house.

There are alternatives, and many may align with your current financial position. 

The most common alternatives are selling assets such as cars, smaller properties, fine art, or valuable personal belongings, remortgaging, accessing a grant, or borrowing money.

Seek expert financial advice

Whether you have a lifetime mortgage equity release or a home reversion product, you can still sell your house.

Understanding the interest rates, fees, and limitations is crucial for a successful sale that works in your favour.

For more information about equity release, let Unbiased match you with a mortgage broker. You’ll get personalised advice from an expert who can help you with your financial and property needs.

Get mortgage advice
We’ll find a professional perfectly matched to your needs. Getting started is easy, fast and free.

About the author
Our team of writers, who have decades of experience writing about personal finance, including investing, retirement and pensions, are here to help you find out what you must know about life’s biggest financial decisions.