Taking out a lifetime mortgage plan, which can also be known as equity release, does not necessarily mean that you are tied to your current property for the rest of your life. Circumstances can change, and you may decide that you would prefer to move home, perhaps to be closer to family, downsize to a property that suits you better or relocate to a different area. However, moving home when you have a lifetime mortgage in place is different from an ordinary house move. There are important financial and legal considerations to understand before putting your property on the market.
Can you move house if you have a lifetime mortgage?
In many cases, it is possible to move home after taking out a lifetime mortgage. However, whether you can transfer your existing plan to a new property will depend on the terms of your particular lifetime mortgage arrangement, the Lender’s requirements and the property you intend to purchase. Lifetime mortgages meeting Equity Release Council standards allow customers to move their plan to a suitable alternative property, subject to the lender’s criteria at the time of the move. This is referred to as "porting" the lifetime mortgage. The new property may need to meet certain requirements relating to its value, type and location. If the property you wish to purchase does not meet the Lender’s criteria, you may need to repay the existing lifetime mortgage loan. This is why it is important to speak to your lender before committing to a property purchase.
What happens to the lifetime mortgage charge, secured against the Property?
From a legal perspective, one of the key points is the charge registered against your existing property. When a lifetime mortgage is taken out, the Lender will secure a legal charge over the property. If you sell that property, the charge will need to be dealt with as part of the conveyancing process. Your solicitor will obtain the necessary information from lender, including the amount required to repay the loan if repayment is necessary. On completion of the sale, the relevant amount will be paid from the sale proceeds and the Lender’s charge will be released. If the plan is being transferred to your new property, the legal process will be different. Your solicitor will need to coordinate the redemption or release of the existing charge and the registration of the new charge against the replacement property.
What if your new home is worth less than the existing Property?
This is an important issue to consider before moving. If your new property is worth less than your existing property, the lender may not necessarily allow the same level of borrowing to be secured against it. Depending on the circumstances, you may therefore need to repay part of the existing loan. For example, if you are downsizing from a larger family home to a smaller property, you should establish in advance whether your existing Equity Release arrangement can be “ported” and whether any repayment will be required. Where a lifetime mortgage meets Equity Release Council standards and the lender requires a partial repayment because you are moving to a lower-value property, that required repayment should not be subject to an early repayment charge, although reasonable costs associated with transferring the plan may apply. Your lifetime mortgage adviser and solicitor can help you understand the financial and legal consequences before you proceed.
Could there be early repayment charges?
If your lifetime mortgage plan cannot be transferred to the new property and needs to be repaid, you should check whether an early repayment charge applies. This will have been pointed out to you at the time of the lifetime mortgage application upon receipt of Legal Advice from your lifetime mortgage Solicitor and will also be explained within the Mortgage Offer.
The amount, if any, will depend on the terms of your particular plan. These charges can potentially have a significant effect on the amount of money available from the sale of your property. It is therefore sensible to obtain a redemption statement from your lifetime mortgage Lender before making firm decisions about your move. This will give you a clearer picture of the amount that may need to be repaid.
The redemption figure will include the outstanding loan, any accrued interest and any applicable fees or early repayment charges.
What about the money left over?
If you sell your existing property for more than the amount required to repay the lifetime mortgage and any other outstanding liabilities, the remaining funds may be available to contribute towards your new property or for other purposes, subject to the terms of your arrangement. If the lifetime mortgage plan is transferred to your new property, the amount released from the existing property and the amount secured against the new property will depend on the Lender’s requirements and the circumstances of the move.
Your solicitor will be able to explain the legal transaction to you, while your financial adviser can advise on the financial implications.
Take advice before you move
If you are considering moving home and already have a lifetime mortgage secured against your property, speak to your lender, lifetime mortgage adviser and a specialist solicitor at an early stage, before committing to a sale or purchase.
