What happens with your equity release when you die?
As you know equity release mortgage products are products which are repaid upon your death.
Equity release products usually come in two forms:
Home reversion plans
& lifetime mortgages
The equity release products are repaid when you die by the equity release provider selling your home to repay whatever is owed to them. The equity release providers will then give your estate whatever is left after they have recovered what is owed to them.
This isn’t the only repayment option the equity release provider could take when you die, your family members may choose to keep the property and simply pay the equity release provider what is owed to them.
Most equity release providers (compulsory for those sign up to the council of equity mortgage lenders) have a no negative equity guarantee which means that you cannot have an equity release product where you owe more than your property is worth.
At the time of your death, you can be assured that the equity release product you have will be less than the value of your property.
This, of course, means that what you owe on the equity release at the tie of your death can be the total value of your property as long as it is no more.
You may want to consider the implications of inheritance tax and any other tax in line with your equity release when you die.
The steps that happen with your equity release after you die
Once you die your equity release lender may contact with your beneficiaries or executors or they may have to contact the equity release lender to find out how the equity release will be repaid back.
This is usually done by selling the property and the equity release lender will usually want to be repaid within 12months of you dying.
Your beneficiaries or executors could also simply pay off the amount owed to the equity release lender when you die if they intend to move into the home or keep possession of them.
When your beneficiaries or executor contact the equity release lender they will need to have your reference number which may have been placed in your initial equity release pack you may have received upon signing up to the equity release lender.
Once the method of repaying the equity release balance has been determined the lender will usually want to see a death certificate as well as a probate document so they can determine who the point of contact for the estate is.
If the equity release lender decides to sell your property after you die then they will want to keep in contact with your estate to inform them of the process.
If the equity release lender is not able to sell the property after you die then they may have to repossess the property. Equity release lenders will look to avoid this and this may indeed be the last resort upon your death.
If you have a joint equity release plan then after you die your partner will have to contact the equity release lender will have to inform them of the death.
The remaining partner in the joint equity release can continue to live in the house until they die or are moved into a care home. The remaining partner in a joint equity release could also decide to repay the equity release balance in full.
When you die you could also leave some of your property as an inheritance to your loved ones even with an equity release.
You can use an equity release calculator to see how much you can afford.
If you need financial advice and you live in the UK then you could contact the Money Advice service over the phone or via chat for impartial advice.
You can also contact the debt charity “Step Change” if you are in debt and need help.