When you die or go into long-term care, your equity release plan will be complete and your beneficiaries or the executors of your will are required to repay the entire loan sum and interest to the provider.
The average equity release provider will give you a 12-month window in order for your beneficiaries to pay off the loan – and this may involve the selling of your property or even renting it out to cover the bill.
If you still have a surviving partner, they will be able to continue living in the property until they die or go into long-term care. Lending Expert aims to cover all the key questions surrounding what happens to your equity release plan when you die and for a free and impartial equity release quote, please complete this form >>
Key Points
- Once you die, your beneficiaries and executors will be responsible for closing your account and they have up to 12 months to pay off your equity release loan
- Any money left over will be available to the individual’s children as inheritance
- Your equity release plan may be cleared by selling your house, renting it out or through existing savings
- Any surviving partners can continue to live in the home until they die or go into care
- Your children will never be required to pay more than the value of the property – due to a ‘no negative equity guarantee’
- Your property could be repossessed as a last resort (this is not common) – but only if all other repayment options have not been successful
How Long Do I Have to Repay The Equity Release Product?
Your equity release provider will usually give your family a 12-month window to repay the entire loan and interest on your behalf. This information will be stated in the agreement you signed and you can always double check this.
Most lenders will understand that if you need to repay the loan by selling the home or earning rental income that this may take longer than 12 months. This is perfectly acceptable and should be communicated openly with the provider.
What Documents Will My Beneficiaries Need to Provide?
Your children, spouse or beneficiaries will be responsible for handling any administration and direct communication with the equity release company.
They will need to provide the lender with:
- A reference number
- Death certificate
- Probate document
How is the Equity Release Scheme Repaid?
You will typically have up to 12 months for your beneficiaries to clear the lifetime mortgage or equity release loan. To clear the balance, your children may need to sell your property and this will end the agreement with the lender. But your children may want to keep the property in the family, so other options include using any leftover savings or inheritance to pay off the debt, renting out the property or your children using their own savings.
If you are renting out the property, it could probably take more than 12 months to repay the full loan amount and interest. But you can always communicate this with the lender and they should offer forbearance.
If a home reversion plan has been used, this will definitely require the sale of the property, since the equity release provider owns a part of it and will want to collect their share. In this scenario, the property could be sold as soon as 4 weeks after the passing of the occupant and this can be quite a fast turnaround. Your family will need to be aware of this as soon as possible.
What Do My Beneficiaries Need to Do?
As beneficiaries, your role is to coordinate and communicate with the equity release provider. You should have a reference number handy and be ready to get in touch with the lender and discuss the next steps.
You will need to oversee the paying back of the loan and also provide a death certificate and probate if need be.
You will be responsible for any arrangements that need to be made to clear the account, including the selling of the property or renting it out.
It could be beneficial to speak to a financial advisor for more information and to make sure the process is as smooth as possible.
Will My Children Be Able to Own the Property When I Die?
Yes, with lifetime mortgages, you will still retain 100% ownership of the home and you can pass this onto your children or any other beneficiaries when you die.
With a home reversion scheme, this is a little different and the house will probably need to be sold by the lender since they will own a larger share of it.
Will My Children Be Left With a Lot of Debt?
No, your children will not be left in debt since every equity release company promises a no negative equity guarantee – which means that you will only own the value of the house and no debt on top.
So if £250,000 is owed to the provider, but the house is sold for £200,000, the no negative equity guarantee means that no more debt is left outstanding for the family to pay.
The only serious conversations might be whether you want to sell the home of the deceased or come to an arrangement so that you can still keep it in the family. With lifetime mortgages, your home is passed down to your children automatically, but with home reversion plans this is not always the case.
What Happens to My Surviving Partner?
If there is a spouse or partner that is still alive, they will have the pleasure to continue living in home until they die or go into long-term care.
Nothing will change in the living arrangement for the surviving partner, but the loan will end and be due to repayment when they pass away.
What Happens if I Go Into Long-Term Care?
If you go into long-term care, it is the same responsibility as if you were to die. The equity release plan would still come to an end and full payment would be required.
Can My Property Be Repossessed?
Properties can be repossessed during an equity release plan, but this is extremely rare and very much a last resort.
This may happen only after you die if your loan has not been repaid, there are no beneficiaries and there is no other way to pay off the loan.
Other reasons why your property could be repossessed include the property not being maintained, damaged or unoccupied for a long period of time.
Do I Need to Inform a Solicitor or Financial Advisor?
Whilst not required, it can be helpful to speak to a family solicitor or financial advisor for advice and to ensure a smooth handling of the repayment process.
Losing a loved one can be very hard and putting financial pressure into the situation does not make it easier. But certainly working with a financial professional could help you avoid any surprises and make sure that you receive your full inheritance and maintain ownership of the property if you want to.
