How does equity release work when you die?

Knowing what happens to your equity release plan on death can help you prepare your loved ones.

Equity release can be a good option for you to release extra funds in later life, but what happens with equity release plans after you die? Knowing what your executors will need to do can give you comfort and make sure you’ve made any necessary preparations.

What happens to your equity release plan when you die?

When you die with an equity release plan in place, your provider will need to be informed as soon as possible.

• With a lifetime mortgage, your home will usually be sold by the executor of the estate to pay back the equity release provider. The loan can be repaid by other means if available meaning the home doesn't necessarily need to be sold.
• If you have a home reversion plan, the provider gets their share when your home is sold. If you sold all of the property to the provider, they get all of the proceeds. If you only sold half, they get half of the proceeds of the sale.

With both lifetime mortgages and home reversion plans, if there’s any money left over it will go to the beneficiaries named in your will.

What if you have a surviving partner?

If you have a joint equity release plan, the plan will be written in both your names to ensure that the other person can continue to live in the property after you die. If they would like to move home after your death, they may be able to do this if the provider agrees that the new property provides enough security for the existing plan, and that it meets their lending criteria.

The equity release plan will come to an end when the last borrower dies or moves into long-term care, and the provider will need to be repaid.

If you're the sole name on the plan, any surviving partner may need to move out so that the property can be sold to clear your debt.

Who pays back your equity release provider?

When you die, your executor or next of kin will need to tell your equity release provider and send them a copy of your death certificate and probate document. They’ll need to know your policy number, so it’s a good idea to make sure they have this, or to file it somewhere for easy access.

The provider will want to know how the debt is to be repaid, and if this involves the sale of the property, will require regular updates on how the sale is progressing. Once repayment is complete, the Land Registry files will be updated to show that there is no longer any money owed on the property.

Most lifetime mortgages now come with a no negative equity guarantee, which means that your beneficiaries will never have to repay more than the home is sold for, even if this is less than the amount owed. This means there is no chance of leaving your beneficiaries in debt as a result of taking out an equity release plan.

When does your equity release plan need to be paid back?

As the settlement amount is usually paid from the sale of the property, the provider will allow some time for the property to be emptied and sold. While most equity release providers allow up to twelve months after the death of the last borrower for the property to be sold and the debt repaid, but some plans have shorter timelines, so it's best to check the terms and conditions of your equity release plan.

• Lifetime mortgage: the amount to be repaid includes the initial and any subsequent amounts borrowed plus interest that’s accrued during the term of the loan. There won’t be any early repayment charges payable after the last homeowner dies, but the loan will continue to accrue interest until the plan is settled in full.
• Home reversion: when your property is sold, the provider will get their agreed percentage share of the final sale price, with anything leftover going to your estate.

Does your house need to be sold to pay off your equity release plan?

Although the house will usually be sold to pay off the equity release plan, this doesn't have to be the case. With a lifetime mortgage, the provider is interested in the repayment, not the property itself so if your beneficiaries decide that they would like to keep the home instead of selling it, they do have the option to repay the loan with other funds if they have them available.

With a home reversion plan, the house does need to 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 is likely to cost more than the original sum paid by the provider, as it would need to be bought back at current market value.

What happens if you move full-time into a care home?

If you move into long-term care accommodation, the understanding is that you won’t be moving back to your home. When this happens, your equity release plan will end and you will need to repay the provider.

If you borrowed jointly, the plan will continue until your surviving partner either dies or also goes into permanent long-term care.

If the provider is repaid and there are funds leftover, these might need to be used to fund the care costs, either for private or for state-funded care. Your local council will conduct a financial assessment (means test) to see how much you might need to pay. If you have assets over £23,250, the council won't contribute to costs for your care (in England and Northern Ireland for the financial year 2024-25 – different rates apply in Scotland and Wales).

What happens if you make repayments?

If you set up a lifetime mortgage where you have made regular interest repayments, this will have helped to keep the costs down by not allowing all of the interest to accrue. The balance of the loan will still be repayable after the death or move into permanent long-term care of the last borrower.

Should your beneficiaries consult a financial adviser?

Sorting out your equity release plan after your death will be made much simpler for your executor and beneficiaries if you've left a clear plan with details of your obligations towards your equity release provider.

If the equity release plan was in joint names and one partner has died, it may be worth revisiting the plan by speaking with a financial adviser for these reasons:

• If you have a lifetime mortgage, interest rates may be lower than when the plan was set up and a newer plan might be better suited to the remaining partner's changed circumstances
• If household income is lower, it will be worth re-running benefit checks to see if any further help is available
• If the surviving partner wants to move home then they may need to look at whether the new property meets the provider's lending criteria, or if early repayment charges might apply
• With a joint home reversion plan, it usually isn’t possible to make changes to your initial agreement and paying back the equity early may incur early repayment charges.