What Happens to Your Equity Release Loan When You Die?

When you first take out an equity release lifetime mortgage or a home reversion plan, you won’t need to make any immediate repayments. Instead, your debt will be due either when you move into long-term care, or when you die.

Does an Equity Release Loan Become Part of My Estate?

When you die, the executor of your will must contact the lender to inform them. The loan would then need to be repaid, usually when your house is sold, although it can be paid from the rest of your estate if you have enough to cover it.

When you die, your beneficiaries or executors will need to contact your lender, and your loan will have to be repaid, usually from the sale of your property although this can vary.

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Individual Equity Release vs. Joint Equity Release

If you’re on a joint equity release plan with your partner, then there’s nothing to repay when the first one of you either goes into care or passes away. It’s only when both of you will no longer be living in the property that repayment kicks in. If it’s an individual equity release plan, then as soon as the holder dies or moves into care, the debt must be paid.

That’s why it’s vital that, if you are a couple, you take out a joint plan. Otherwise, your partner might be forced out of the home while it’s sold to clear the debt.

Equity Release: What Happens With a Lifetime Mortgage?

When you die or move into care, if you had a lifetime mortgage then it’s up to your beneficiaries to inform the lender of what’s happened. They’ll then be given a timeframe in which they have to repay the loan, which is usually 12 months. This gives plenty of time for the property to be sold, and all agents and solicitors fees cleared, before the paying off of the debt.

If you happen to be leaving behind a large estate with enough money to pay off your equity release plan without selling your home, your lender will usually accept this instead. That way, your home can be passed onto your beneficiaries. Whatever happens, your remaining estate after the loan is settled will be split between your beneficiaries as per your instructions in your will.

This is also why it’s important that you make sure your lifetime mortgage has a ‘no negative equity’ guarantee. This stops the value of your debt from rising above the value of your property, no matter how much interest should accrue. Otherwise, you may owe more than your home is worth, which would then be taken from the rest of your estate or be passed onto your loved ones to pay.

Equity Release: What Happens With a Home Reversion Plan?

If you opted for home reversion, the lender would already own your home. This makes the process a little simpler for your beneficiaries, as they just need to inform the lender that you’ve moved into care or passed away. The lender will then take care of the sale themselves, meaning your beneficiaries don’t need to get involved in the admin.

The only difference is if you chose to ring-fence part of your property – if that’s the case, the lender will sell the property and then pay the agreed percentage of proceeds into your estate to be split between your beneficiaries.

How Can Money Savings Advice Help You With Releasing Equity?

Here at Money Savings Advice, we have partnered with some of the UK’s leading Equity Release brokers. They have already helped thousands of people get the best Equity Release deal and they can do the same for you.

Choosing an independent adviser means they won’t recommend a scheme unless they are sure it is in your best interests. Their advice is also regulated by the FCA, which gives you an additional layer of protection.

If you would like to speak to one of these brokers who can provide you with a ‘whole market quote’ then click on the below and answer the very simple questions.