Can You Transfer Equity Release to Another Property?

When you first take on an equity release loan, it’s secured against your home. You won’t make any immediate repayments, but the loan will instead be paid off once you die or move into full-time care.

It’s likely that the debt will be settled with the sale of your home, so your loan is tied to the property.

Can You Transfer Equity Release to Another Property?

You can usually transfer an equity release loan to another property if you wish to move home, but it’s subject to your lender agreeing and will depend on the value of the new home. If you downsize you may need to repay part of your loan.

Read on to find out more about transferring the loan to a new property.

Looking for other information on Equity Release? This guide has info on 'Can equity release be transferred to another property?' We have also writen extensively about:

• - Can equity release be paid back?
• - Can you use equity release to pay off mortgage?
• - Can you be refused equity release?
• - Can equity release be repaid before death?

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Why Do People Move Home After Taking Out Equity Release?

There are a number of reasons people decide to move home even once they’ve taken equity release on their property.

For some, it’s a decision out of their hands. It could be that you need to raise more money to support yourself through retirement, or you simply need to be more comfortable and neighbours are causing you issues.

For others, it could be that your partner has passed away and now you no longer need a house as large, and you wish to downsize to something more suitable. Or you may just finally make the decision to move to a new location, somewhere you’ve always wanted to live, and feel that you’ve now earned that move.

However, the statistics show that the older you are, the more likely you are to remain in your home.

Source: Equity Release Council Autumn 2019 Market Report

The survey conducted shows that most people of retirement age are settled and so don’t want to move home. If you do, it may be a decision that you would rather avoid. That’s why you should always speak to a financial adviser before you make that decision, as they may be able to help you find alternatives.

These statistics also show why equity release is popular in the first place – if you need money, but don’t want to sell your home, then equity release lets you stay in the property and frees up that cash lump sum you need.

Equity Release: Moving to a New Home of Similar Value

The easiest way to move home and transfer equity release is if you’re moving to a property of similar value. This might be that you just need to relocate to be closer to family, or you may just not have close ties with your current home and circumstances may make you hanker for a move.

If the new property is of an equivalent value as your current home, then your lender should offer you a seamless transfer of your equity release loan. Any lender that’s registered with the Equity Release Council has to offer the option and, if the property is of equivalent value, then there should be no major obstacles to block you.

It’s worth noting that value isn’t simply based on the property itself, but also how easy it will be to sell and any external factors which could cause the lender concern.

For example, you likely won’t be able to sell your home in order to move into a property on a retirement village, even if the cost of the property is the same. That’s because it’s therefore not something that the lender can sell on the free market and so makes it less of an attractive proposition, with no guarantee the lender can quickly recoup their money.

Equally, if you intend to move to a home that’s near commercial buildings, or is in a flood warning zone, then the lender may again not approve. The home itself may have equivalent value but the risk of issues caused by these external situations may make it trickier for the lender to sell the property when it comes to settling the debt once you’ve died or gone into care.

So if you do intend to move home and you believe your desired property is worth roughly the same as the home you currently own, make sure to also check for any other factors that could impact the sale of the home in future before you start planning. You can be sure that your lender will do extensive checks and it’s best to be prepared.

Pros and Cons of Transferring Equity Release to Another Property

There are a number of factors to take into consideration when looking to transfer equity release to another property. The pros include:-

• No need for additional legal advice
• Maintain your relationship with an existing lender
• The transfer process should be relatively quick and seamless

However, there are some downsides to porting your equity release to another property which includes:-

• Additional non-refundable valuation fee
• Cover your lender’s legal costs of transferring the property charge
• Partial repayment of equity release if downsizing

Even if you are just considering this type of transaction, it is very important that you are aware of the pros and cons.

Should I Take Financial Advice Before Attempting an Equity Release Transfer?

Yes. There are numerous factors to take into consideration when looking to transfer your equity release to another property. As we touched on above, you may be faced with a number of additional fees which can sometimes be fairly large in size.

You may also be forced to repay part of the equity release if you are downsizing to lesser value property. In this scenario, your lender would have reduced asset backing, which is the reason why you may be asked to realign your equity release.

It will obviously depend upon the reasons why you are moving home, but there could be other options available. An experienced financial adviser in this area will be able to give you a number of options and explain the pros and cons of each potential path. It is often refreshing to take advice from an unconnected/independent third party, which can sometimes give you a different angle on your housing challenges.

Equity Release: Moving to a New Home of Lesser Value With Lifetime Mortgages

If you do decide to move home with a lifetime mortgage, and your new property isn’t worth as much as the old one, then your lender will carry out an evaluation on the value of the loan against the home and the maximum equity you could have released if the loan was taken out against the new property.

If the value of that is lower than the amount you owe on your existing equity release loan, you’ll be asked to pay the difference. You should be in the position to do this, if you’ve been properly advised, from the profits you make by selling your home and moving into a cheaper one, but make sure you get financial advice if this concerns you, or if you were planning on downsizing just to raise more funds to support your retirement.

Equity Release: Moving to a New Home of Lesser Value With Home Reversion Loans

If you’ve taken a home reversion loan, this means you’ve sold a share of your home to the lender in exchange for the money. If you downsize to a home that’s worthless, then you may be asked to increase the share in order for the transfer to be approved.

For example, if your current home is worth £250,000 and you sold a 40% share in it to get your home reversion loan, then the value you have sold is £100,000. If you then downsized to a home worth £200,000, your home reversion lender will transfer their stake to the new property but will increase it to 50%, so that it’s the equivalent £100,000 stake they had in your old property.

Why Would My Lender Likely Refuse a Transfer to a Retirement Complex?

We have seen a huge increase in demand for retirement complexes which bring together people of similar age groups looking for a similar type of lifestyle. These complexes often have restrictions on the age and number of residents.

It is these restrictions that would prevent your equity release lender from sanctioning a switch from your current property to a retirement property. When looking to sell the property, these restrictions could impact the price and make it difficult to recoup the total equity release.

There’s also the fact that where there are restrictions with any type of property, at best, this will take longer to sell, at worst, it might be difficult to sell. So, when you take a step back and look at this from a distance, it is understandable that lenders are so reluctant to allow such moves.

Equity Release: Downsizing Protection

One option to consider when you take out your equity release loan is the inclusion of downsizing protection. It’s an optional feature that’s designed for anyone who wants to take equity release but is concerned that they may wish to downsize later in life.

If you take out an equity release scheme that includes downsizing protection, your agreement will include a clause that allows you to repay your equity release loan in full without any early repayment charges, so long as you’re doing it in order to move to a new home of lesser value.

Typically, you’ll need to have been part of an equity release scheme for five years before this becomes an active option.

Stats on downsizing protection: According to the Equity Release Council’s Autumn 2019 Market Report there were 287 equity release products available for customers to choose from. Of those, 129 included downsizing protection, which is 45%. It’s worth noting that while the number of downsizing protection offerings double since Autumn 2018, so did the overall number of equity release products, so that 40-45% selection has remained consistent.

Are There Any Alternatives to the Transferral of Equity Release?

It may be that you took out your equity release plan some years earlier when your financial situation was very different. As a consequence, when looking to move to a new property, you may be able to use additional assets/funding that have become available. So, when looking at a possible transfer of equity release to a new property, it is sensible to sit down and look at your overall financial situation. Are there any viable alternatives?

Can you make better use of additional funds/assets which have become available? Just because an equity release was the right move when you signed the agreement does not necessarily mean you have to maintain this when looking to move to a new property. Keep your options open!

In Summary

If you’re considering moving home for any reason, it could be possible to transfer your equity release loan, but it’ll depend on your circumstances and you should speak to your lender to find out more.

If you haven’t yet taken an equity release loan, and you’re considering moving home in future, then read our further guides to learn more about how equity release works.

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.