Selling a House With Equity Release: Early Repayment Charges Explained

Equity release does not stop you selling. It does change the arithmetic, and the figure that matters is the redemption statement, not the original loan.

What you actually owe

Most equity release is a lifetime mortgage: interest is rolled up and compounds, so the debt grows over time. The amount repayable on sale is the outstanding balance on the day of completion, plus any early repayment charge and administration fees. Request a redemption statement from your provider before you do anything else — the number is frequently very different from what people assume.

A smaller number of arrangements are home reversion plans, where the provider already owns a share of the property. In that case you are selling a property in which the provider has a fixed percentage interest, and the proceeds split accordingly.

Early repayment charges

Early repayment charges (ERCs) apply when a lifetime mortgage is repaid voluntarily during the charge period. Structures vary by provider and by the year the plan was taken out — some are fixed percentages that reduce over time, some are gilt-linked and move with interest rates. They can be substantial.

Key exemptions to check in your terms:

• Death or entry into long-term care. Most plans allow repayment without an ERC in these circumstances, usually within a defined window after the event.
• Downsizing protection. Many plans taken out in recent years allow you to repay without an ERC if you move to a new property and the plan cannot be transferred, typically after a minimum number of years.
• Porting. Plans from providers meeting Equity Release Council standards generally allow the plan to move to a new property, subject to the new property meeting the lender''s criteria. Flats, non-standard construction, retirement housing and properties with agricultural or age restrictions often do not qualify.

Selling and moving to a new home

The order of events matters:

1. Get the redemption statement and the ERC position in writing.
2. Ask the provider whether the plan can be ported to the intended new property, and get their criteria before you offer on anything.
3. Confirm with your conveyancer that the loan and any interest will be cleared from the sale proceeds at completion.
4. Take regulated advice. Equity release advice is regulated, and your original adviser should review any change.

Selling after death or a move into care

Executors and attorneys commonly discover a lifetime mortgage only after the event. Providers typically allow a period — often around twelve months — for the property to be sold before they take action, and interest continues to accrue throughout. That creates real pressure, because the debt grows monthly while an empty house sits on the market with insurance and council tax running.

A no-negative-equity guarantee, standard on Equity Release Council member plans, means the estate does not owe more than the sale proceeds where the property is sold at a fair market price. Providers will usually want evidence that the price achieved is reasonable, so keep valuations and marketing records.

When a fast cash sale makes sense

Where interest is compounding on an empty property, a certain completion date can be worth more than a higher asking price that takes five months to achieve. Run the comparison properly: monthly interest, insurance, council tax and maintenance against the difference in price.

We buy in England and South Wales with a fixed written offer, legal fees covered, and completion in as little as 7 to 14 days. If holding on and selling conventionally leaves the estate better off, we will tell you.

Send us the details or read about empty property insurance.