Using an equity release loan to free up cash from your property has all sorts of benefits attached.
However, if you’ve taken out this type of package or you are in the process of considering it, you might worry about being stuck in the same property indefinitely, because of how these deals are designed.
To clear up any confusion, let’s discuss the factors that will determine whether you are allowed to sell your property after taking advantage of equity release.
Equity release explained
Equity release is a type of loan, also known as a lifetime mortgage, which lets you borrow against the value of a home you own outright. And with a free equity release calculator, you can quickly see how much you could secure under this arrangement.
The term ‘lifetime mortgage’ can be daunting, and suggests that you will only be able to pay off the loan after you pass away.
In reality, no product in this category has such morbid restrictions in place. If you choose to and you have the means to do so, you can pay off an equity release loan as and when you see fit.
The conditions which may apply
Every equity release agreement will be different, and should be tailored to the needs and circumstances of the borrower.
There are boilerplate schemes that set the standard out there, and as a rule of thumb you can expect such deals to accommodate the option of moving home further down the line.
In this scenario, the way that a move is handled is fairly standard, albeit with the lifetime mortgage moving from one property to another along with you.
Your equity release provider will need to give the green light to any move you decide to make, and if they are happy with your new choice of property, you can carry on as usual, without having to repay any aspect of the loan at this point.
However, if you are either moving to a property which has a much lower asking price than your previous home, or you are choosing a house which isn’t normally mortgageable, perhaps because it has a non-standard construction, then you could struggle to get lender approval.
In this scenario, you will have to use the proceeds of the property sale to pay off the equity release, and potentially suffer early repayment fees, on top of being left with less cash to use on your move.
The specialist products to consider
So far we’ve largely talked about the impact of selling your home if you have already taken equity release in the context of the mainstream loans that exist in this market.
However, it’s also worth pointing out that a lot of changes and innovations have occurred recently, with lenders choosing to mix things up and give borrowers more flexibility than ever before. It’s simply a case of looking out for deals that align with your desires.
For example, you can find some equity release packages which include the provision for selling your home and downsizing at a later date, with no early repayment fees or other penalties applying if you decide to go this route.
Likewise you could choose smaller payouts occurring over a longer period in place of a lump sum when you first acquire the loan, which again lets you adjust the package to your circumstances and preferences.
Getting advice from an equity release expert, and comparing deals from different lenders before you commit, will ensure that if being able to sell your home seamlessly in the future is a priority, this factor is encompassed as part of a lifetime mortgage.