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How does equity release work when you die?

Understand the equity release repayment process when someone dies.

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 to equity release plans after death or a move into long-term care? Knowing what your spouse or family 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 be sold by the executor of the estate to pay back the equity release provider, as well as any additional charges from the sale, such as estate agent and legal fees.
  • If you have a home reversion plan, the provider gets its 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 jointly borrowed with someone else, the equity release 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 downsize after your death, they may be able to do this if the provider agrees that the new property is enough security for the existing plan.

The equity release plan will then 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, your 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 be updated on how the equity will be paid back, and how the sale of the home is going. Once repayment is complete, the land registry 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 family 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 family in debt.

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 lifetime mortgage providers allow up to twelve months after the death for the property to be sold and the balance paid, home reversion plan providers tend to have shorter timelines.

  • Lifetime mortgage: the amount to be paid includes the initial amount borrowed plus interest that’s accrued during the term of the loan. There won’t be any early repayment charges 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 may 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 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 as of April 2022 – 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 the interest to accrue. The balance of the loan will still be repayable after the death or move into long-term care of the last borrower.

Should your beneficiaries consult a financial adviser?

Sorting out your equity release after 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 was in joint names and one partner has died, it may be worth revisiting the plan you hold 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 benefits checks to see if any further help is available
  • If the surviving partner wants to downsize then they may need to look at whether their lifetime mortgage is transferable 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.

How does Saga Equity Release support your beneficiaries with equity release after your death?

The product available through Saga Equity Release is the Saga Lifetime Mortgage, which is available exclusively through the service and is provided by Just.

It’s important that your executors let Just know as soon as possible about a death, so that they can support you through the process of closing the lifetime mortgage.

Just will need to see a death certificate, and possibly other paperwork as well. Just understand that this can be a difficult time, and they'll guide you through a step-by-step process to make sure that everything is managed correctly.

How does Saga Equity Release support you if you move into care?

With the Saga Lifetime Mortgage you won't be asked to pay early repayment charges if you sell your home because you (or both of you if borrowing jointly) need to move into permanent care.

Just also appreciate that there may be circumstances where you need to move into residential care temporarily and will want to return to your home at a later date. It’s important to keep Just updated if you need to leave your home on a temporary basis as each case is assessed individually.

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Whether you have questions about equity release or just want to find out more, the expert team are on hand to help.

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More on equity release

For more information and to help you understand equity release a little better visit some of our other articles and pages.