What is an Equity Release Home Reversion Plan?
Question asked by Mr R Trent
We released equity from our home a few years ago. Now we’re getting older our home feels too big for us and we’re thinking of moving house to downsize. What happens to the Lifetime Mortgage when we move? Do we have to repay it?
Providing you took out a Lifetime Mortgage from a provider approved by the Equity Release Council, your mortgage should be what’s known as ‘portable’. As a result, you should be able to transfer it over to a new property.
However, be aware that if you’re downsizing and the outstanding mortgage balance exceeds the amount the lender would have been willing to lend on the new property, you may have to repay part of the loan. This often incurs early repayment charges.
As you’re older now than when you took out the first Lifetime Mortgage, you may find that the lender is willing to increase the percentage of a property they’re willing to lend to you.
This means that even if you move to a smaller house, thanks to a larger permitted loan percentage due to your older age you may find that you won’t exceed the lender’s threshold.
This could mean you therefore won’t have to make any repayments, but always check this threshold with your Equity Release company before you start house hunting.
Lifetime Mortgage providers are only willing to lend on properties that they’re able to resell later on the open market. Equity Release is therefore typically only portable to ‘suitable alternative properties’.
When moving from a property with an outstanding Lifetime Mortgage, be aware that not all properties will be classed as ‘suitable alternatives’ by your lender.
Check with your lender about the types of properties you’re able to move to, as this will obviously have a big impact on your decision about where you move.