Equity release is one way to release funds in later life. But what happens after you die? Knowing the next steps can give you and your loved ones comfort. It also gives you time to put any plans in place.
When you die with an equity release plan in place, your provider needs to be told as soon as possible.
With both products, if there’s any money left over it will go to those named in your will.
If you have a joint equity release plan, the plan is written in both your names. This means the surviving partner can still live in the property after their partner dies.
The surviving partner could choose to move home. But the provider will check the new property offers enough security for the plan. It must also meet their lending criteria.
The equity release plan ends when the last borrower dies or enters long-term care. This is when the provider must be repaid.
If you cohabit but didn’t make a joint plan, your surviving unnamed partner may need to move out as in most cases, it's likely that the home will need to be sold to repay the debt.
When you die, your executor or next of kin needs to tell your provider. They must also send them a copy of your death certificate and probate document. Your policy number will be required, so make sure it's easy to find.
The provider will want to know how the debt is to be repaid. If this involves the sale of your home, they will ask for regular updates. Once repayment is complete, the Land Registry files will be updated to show that no money is owed on the property.
Most lifetime mortgages now come with a no negative equity guarantee. This means your loved ones will never have to repay more than the home is sold for. That’s still the case if this is less than the amount owed. It means your plan won’t leave your loved ones in debt.
As the settlement amount is usually paid from the property sale, the provider will allow time for it to be cleared and sold. Most providers allow up to 12 months after the death of the last borrower for the sale and debt to be repaid. As some plans have shorter timelines, it's best to check your T&Cs.
The house tends to be sold to pay off the plan. But this doesn't have to be the case. With a lifetime mortgage, the provider wants the money, not the property itself. If your loved ones want to keep the home, they could repay the loan with other funds.
With a home reversion plan, the house must be sold, as part or all of it may already belong to the provider. The family could buy back the property from the provider. But this would cost more than the sum paid by the provider, as it would need to be bought back at current market value.
If you move into long-term care, your equity release plan ends, and you need to repay the provider. If you have a joint plan, it continues until your surviving partner dies or enters long-term care.
If the provider is repaid and there are funds left, these might be used to fund the care. Your local council will conduct a Financial assessment to see how much you might need to pay.
With some lifetime mortgages, you could choose to make regular interest repayments. This helps to keep the total costs down. The full loan amount will still be due after the last borrower dies or enters long-term care.
It's simpler for your loved ones to sort out your equity release plan after your death if you've left a clear plan. This should contain details of your obligations to your equity release provider.
If it's a joint plan and one partner has died, it may be worth revisiting the plan with a financial adviser. Here’s why:
Provided by HUB Financial Solutions Limited
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