Moving home after equity release

Safersurfer

Hi, does anyone know if there are any restrictions on how soon you can move home after taking equity release?

I am thinking of getting equity release just before I retire to pay off my outstanding mortgage, but may then want to move a year or so later. I just wondered if they normally place any restrictions on this - ie you must stay in the present property for five years, or something.

Thanks

Emmia

Safersurfer said:

Hi, does anyone know if there are any restrictions on how soon you can move home after taking equity release?

I am thinking of getting equity release just before I retire to pay off my outstanding mortgage, but may then want to move a year or so later. I just wondered if they normally place any restrictions on this - ie you must stay in the present property for five years, or something.

Thanks

Why don't you just move / downsize to eliminate the mortgage? Equity release just means you have a debt elsewhere that will need to be repaid.

user1977

It sounds an expensive way of doing it. Why not just keep on the current mortgage until you sell?

MattMattMattUK

Safersurfer said:

Hi, does anyone know if there are any restrictions on how soon you can move home after taking equity release?

I am thinking of getting equity release just before I retire to pay off my outstanding mortgage, but may then want to move a year or so later. I just wondered if they normally place any restrictions on this - ie you must stay in the present property for five years, or something.

Thanks

Doing it the way you are intending is likely to cost you quite a lot of money, terms vary with the different suppliers, but I suspect you would be throwing away a minimum of £10k by doing equity release then moving. 

Safersurfer

Thanks for replies. It's unlikely I'll pay my mortgage off before I retire and I don't want to downsize - I want to buy somewhere in a different location for my retirement at the same value, but will obviously need to pay the mortgage on my present place off first.

So I really just wondered if they would stop you doing that - Take ER to pay off mortgage, then move to a different location to a property of a similar value shortly afterwards.

silvercar

Safersurfer said:

Thanks for replies. It's unlikely I'll pay my mortgage off before I retire and I don't want to downsize - I want to buy somewhere in a different location for my retirement at the same value, but will obviously need to pay the mortgage on my present place off first.

So I really just wondered if they would stop you doing that - Take ER to pay off mortgage, then move to a different location to a property of a similar value shortly afterwards.

I don't think ER works that way. ER is just a mortgage secured on your home albeit with the interest not charged and building up to be included in the amount repaid. Sell the property and the ER needs repaying, leaving you less to buy your next property outright or needing a new mortgage product on the new place, now it may be possible to get an ER product from the outset, I'm not sure. It may even be possible to transfer an existing ER product, but I'm doubtful.

Linton

silvercar said:

Safersurfer said:

Thanks for replies. It's unlikely I'll pay my mortgage off before I retire and I don't want to downsize - I want to buy somewhere in a different location for my retirement at the same value, but will obviously need to pay the mortgage on my present place off first.

So I really just wondered if they would stop you doing that - Take ER to pay off mortgage, then move to a different location to a property of a similar value shortly afterwards.

I don't think ER works that way. ER is just a mortgage secured on your home albeit with the interest not charged and building up to be included in the amount repaid. Sell the property and the ER needs repaying, leaving you less to buy your next property outright or needing a new mortgage product on the new place, now it may be possible to get an ER product from the outset, I'm not sure. It may even be possible to transfer an existing ER product, but I'm doubtful.

I have an ER mortgage.  It works just like an ordinary mortgage.  You simply get an offer accepted on your new house and the ER company will confirm how much they are prepared to lend when they have checked the valuation.

Once you have your ER mortgage you can trasfer it to yet another new house but again the ER company would base their loan on a valuation.  If they are not prepared to lend the full amount on the new house there will be no early redemption charges when you pay off the difference.

With ER you have to work through an advisor. 

Emmia

Safersurfer said:

Thanks for replies. It's unlikely I'll pay my mortgage off before I retire and I don't want to downsize - I want to buy somewhere in a different location for my retirement at the same value, but will obviously need to pay the mortgage on my present place off first.

So I really just wondered if they would stop you doing that - Take ER to pay off mortgage, then move to a different location to a property of a similar value shortly afterwards.

It sounds like you don't have enough money for that preferred retirement property - presumably the bank wouldn't give you a mortgage on your retirement income alone? Could you carry on as you are, buy and sell as planned but get the ER on the new property? (I personally don't think ER is a great idea generally due to the way interest is rolled up, but there you go). 

In practical terms the ER company would need to value your current home, and the future home - what if they wouldn't do the ER on your future property?

ER is still a debt, and potentially at a fairly high interest rate - you sound relatively young so this could wipe out all the equity in your home, leaving nothing for care costs or leaving in a will if that was your intention.

Safersurfer

Emmia said:

Safersurfer said:

Thanks for replies. It's unlikely I'll pay my mortgage off before I retire and I don't want to downsize - I want to buy somewhere in a different location for my retirement at the same value, but will obviously need to pay the mortgage on my present place off first.

So I really just wondered if they would stop you doing that - Take ER to pay off mortgage, then move to a different location to a property of a similar value shortly afterwards.

It sounds like you don't have enough money for that preferred retirement property - presumably the bank wouldn't give you a mortgage on your retirement income alone? Could you carry on as you are, buy and sell as planned but get the ER on the new property?

Yes, that's the alternative. Just trying to look through the best options really. The recent increase in mortgage rates (I have an interest-only mortgage) means I am now unlikely to be able to pay off the capital, so I'd like to use ER to do this but I also want to move when I retire.

MWT

Safersurfer said:

Emmia said:

Safersurfer said:

Thanks for replies. It's unlikely I'll pay my mortgage off before I retire and I don't want to downsize - I want to buy somewhere in a different location for my retirement at the same value, but will obviously need to pay the mortgage on my present place off first.

So I really just wondered if they would stop you doing that - Take ER to pay off mortgage, then move to a different location to a property of a similar value shortly afterwards.

It sounds like you don't have enough money for that preferred retirement property - presumably the bank wouldn't give you a mortgage on your retirement income alone? Could you carry on as you are, buy and sell as planned but get the ER on the new property?

Yes, that's the alternative. Just trying to look through the best options really. The recent increase in mortgage rates (I have an interest-only mortgage) means I am now unlikely to be able to pay off the capital, so I'd like to use ER to do this but I also want to move when I retire.

You will need to talk to an advisor as part of the ER process, so explain what you plan to do and they will help find a product that has the features you require.

Do keep in mind that advisors range from free (Step Change, and some High St lenders) to expensive (Anywhere from a few hundred to a few thousand) so do make sure you understand the costs involved when you pick an advisor.

You do need to be careful with you plan to move soon after, as the ER lender has to be willing to lend on the property (not all property construction types qualify, and location/adjacencies are important), and the amount they are willing to lend must be at least the same as the amount you have already borrowed, or you will have to make a repayment.

You can give yourself some protection by agreeing a higher amount of EQ than you need for the mortgage repayment and then only drawing enough for that, so if the new property doesn't quite support the same level of loan, you are just looking at a reduction in the remaining funds available for drawdown, rather than a repayment. Obviously the value and suitability of your current property vs the remaining balance on your interest-only mortgage, and your age, will play a large part in this process.

You don't mention a partner, but if you are not the only owner on the deeds, do remember that it is the youngest life that determines if you qualify for ER and at what sort of percentage...