In general, all equity release borrowing conducted by Equity Release Council approved lenders will make it possible to transfer your equity release balance to another property, provided your new property meets your lender’s criteria.
This could be a problem if, for example, lending criteria has changed in the time since you took out your equity release. You would also have to continue to meet the other terms of your equity release in your new home – such as living there permanently. It is worth noting that many equity release companies will not lend against retirement accommodation or sheltered living, as these often come with restrictions and can be difficult to sell. You will also have to pay legal costs to effect the transfer as well as paying for a valuation of the new property.
Another issue that could prevent you from transferring (also referred to as “porting”) your equity release, even if your new house meets your lender’s standards, would be that the value of your new home is worth a smaller percentage of the equity release balance on your existing home, affecting the loan-to-value (LTV). In this case, to transfer the balance you would be required to repay part of the equity release early to bring the borrowing level down to a LTV the lender is comfortable with.
Equity release products are generally designed to be long-term financial settlements that last until death. This can be problematic as, if for any reason you are not able to move your equity release balance to your new home, and assuming you still want or need to move, you would have to repay your equity release, including interest charges incurred up to that point. You could potentially be liable for an ERC as well, especially in the first few years after taking out your loan – although downsizing protection means that homeowners moving into a lower value home will not be charged early repayment fees if forced to terminate their equity release.
In some circumstances it could be preferable to set up a new equity release scheme. The main reason would be a substantial decline in long-term interest rates since your existing plan was set up – admittedly, this is hardly a problem at present, but in the aftermath of the financial crisis, interest rates on lifetime mortgages approached 7%. At the height of the pandemic over a decade later, they were almost three percentage points lower, at just above 4%. However, it is important to note that, if you decide against porting your existing equity release product and decide to take out a new plan, you will again be required to take legal advice, at your own cost.
To understand if you are able to transfer your equity release, you should first talk to an equity release advisor, who will be able to walk through the options and help you to understand which option is right for you.
