All equity release plans approved by the Equity Release Council allow you to move whenever you like. If you have a lifetime mortgage, you may transfer it to your new home. However, if you have a home reversion plan, you will not own all of your property. You may not therefore have enough equity to purchase a new home.
In this guide, you will learn:
This guide will focus on lifetime mortgages which are the most common type of equity release plan. The other type of equity release current available being home reversion plans. Home reversion plans differ as the money you release from the property is not a secured loan like a mortgage, but instead, you sell a percentage of your home.
Please note: Transferring your existing lifetime mortgage to a new property is often referred to as 'porting'.
Transferring your equity release plan to a different property is broadly similar to taking equity release in the first place.
It is a requirement that you receive financial advice, and so your first point of call should be to speak with an equity release advisor.
They will be able to discuss your intentions and research the best way to proceed.
The construction and features of your new property will need to be matched to plans available in the market. So make sure you speak with your advisor before committing to a particular property.
It may be that your advisor recommends that you port your existing equity release to your new property. Alternatively, they may suggest repaying your current equity release and taking out a new plan.
Regardless of which path they recommend, your equity release advisor will need to provide you with a Key Facts Illustration (KFI) from the lender.
All lenders are required to produce KFI's in similar formats. So while the colours used, and some of the details may change, the overall points they cover will be the same.
If you choose to proceed, there will be a couple of notable differences.
- Valuation fees - If you port your existing equity release plan, you will likely have to pay for the valuation upfront. The money you pay for a valuation will also be non-refundable. If you take a new lifetime mortgage, you will most likely be able to have a plan which includes a free property valuation.
- Solicitors - If you port your existing equity release plan, you will be able to choose whether you receive further legal advice or not. If you take a new equity release plan, you will be required to obtain legal advice, which will come at an additional cost.
Make sure you keep these points in mind when deciding which path you wish to take.
Remember, if you are moving home, you will also incur other associated fees.
I have written another article on using equity release to purchase a property, where I cover many of these other associated costs.
We now know how to port your equity release, but how do you decide whether to port, or take out a new plan? Let's break this down into more detail.
Porting
Pros
- You are not required to receive further legal advice which will save you money.
- You may be familiar with your existing lender and not wish to change.
- The process will likely be quicker.
Cons
- You will likely need to pay an up-front, non-refundable valuation fee.
- You may incur additional fees (including covering the lender's legal costs to transfer the charge).
New Equity Release
Pros
- You can access the best rates across the market without being tied to your existing plan.
- You will be able to access plans which include free property valuations.
Cons
- You may incur an Early Repayment Charge (ERC) from your existing lender for repaying before the natural term-end.
- You are required to receive legal advice on your new plan, which will cost money.
It would be best if you discussed these factors with your equity release advisor to ensure that they consider your preferences.
Finally, you should make sure your advisor produces a report for you with projections of the total costs over the plan for each option.
This is especially important when being recommended to move to an alternative plan while incurring an ERC from your current lender.
A new shiny rate may look appealing, but it may cost you more over the estimated plan term.
One additional point is that by porting plan, you will likely receive a new interest rate, and also any ERC window will probably reset.
So if you were hoping to take your plan with you to your new home on the same terms, you might be disappointed.
The main reason that you would not be able to port your equity release is the new property not meeting the lender's criteria.
Equity release lenders are becoming more and more flexible with their lending criteria. However, there are still some properties on which they are reluctant to lend. These include:
- Properties made of non-standard construction (including some types of concrete);
- Age-restricted properties (such as over 50's retirement homes);
- Leasehold properties with short terms remaining;
- Properties with a high risk of flooding;
- Homes which require renovation work (including properties which need full rewires, full modernisation, new central heating, etcetera)
For this reason, I recommend that you seek clarification from your equity release advisor before firmly deciding on your new home.
When moving to a new property worth less than your current home, you may need to repay some of the equity release money to the lender.
For example, if you were to move to a property worth half the value of your existing home, you may need to repay half of the money owed. This is because the lender will now have half as much security in your new home.
Hopefully, this will not be a problem though, as you will likely have enough money from the sale proceeds of your property.
Most equity release plans are secured on your primary residency, just like a residential mortgage. If you move and don't port your plan, you will probably have to repay your equity release.
You may incur an Early Repayment Charge (ERC) for doing so.
However, a feature that has increased in popularity over the years is a waiver of ERC upon moving home; commonly referred to as 'downsizing protection'.
The exact details of the feature vary from lender to lender, so it is essential that you find out if you will incur an ERC before deciding to repay.
If you have further questions, why not speak with one of our qualified advisors?
Call us on 0207 158 0881 or use our online form to book your FREE consultation.
While a qualified equity release advisor has written this guide, it is not intended to be used as financial nor legal advice and should not be relied upon.
To understand the full features and risks of an Equity Release plan, ask for a personalised illustration.
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