Can I Sell My House in Central London After Equity Release

Whether you have already taken the decision to release equity from your central London home or you are considering doing so, you’re probably wondering what this means in terms of whether you can sell your house.

With average house values of around £1 million in Pimlico and £1.5 million in Victoria, releasing equity in high value properties allows homeowners to access tax free cash for home renovations, luxury holidays or any other reason.

So, if you have already taken out an equity release plan or you are thinking about it, here’s where you stand if you decide to sell the property in future or are looking to put it on the market now.

What Is An Equity Release?

Equity release plans are financial arrangements that allow homeowners to access the equity tied up in their property without needing to sell, and they remain living in the home. This can happen in a range of circumstances, including when a couple is divorcing and selling a house, but one of them wants to keep living there.

The most common type of equity release is a lifetime mortgage which is a loan secured against your home. The idea is that the loan gets repaid when the homeowner either dies or moves into long-term care and the house is sold. The interest rate for an equity release loan is usually fixed throughout the loan term.

The other type of equity release product is a home reversion plan, which involves selling a portion of your property’s value to a lender and they pay you either a lump sum payment or regular income.

The money acquired can be used as the homeowner wishes, including to supplement retirement income.

Who Can Release Equity From Their Property?

Most equity plans are only available to homeowners aged 55 and above, and there will need to be a suitable amount of equity in the property. Lenders will assess factors such as the health and age of the applicant, as well as property condition, to decide whether to approve the loan.

The amount of equity the lender will be prepared to lend will depend on the property value, any outstanding mortgage and their overall financial situation. Typically, the amount will range from between 25% and 60% of the market value of the property.

Can I Sell My House If I Have Equity Release?

Yes, even if you have a house with equity release you will still be able to sell your property, but you will be required to repay the loan and the interest on the loan. There may also be an early repayment charge to pay. When the sale completes, the money will be used to pay off the amount you owe and then if there is any remaining money, you will receive the money.

If you are looking to buy another property, for example, if you are downsizing, the other option is to port your equity release. This means you transfer the equity loan plan to a new property. Most lifetime mortgages have the option to port the loan to another property, but this is an important detail to check if you are still deciding whether to release equity. Retirement plans often change, and you may need the flexibility in future to move house after you have taken out equity release.

How To Sell Your House After Equity Release

These are the steps involved in selling your home after equity release:

1. Check the Terms of Your Equity Release Plan

Firstly, check your paperwork to see the terms of your equity release plan to find out whether there is an early repayment charge and any other terms to be aware of.

2. Speak to Your Equity Release Provider

Contact the provider of your equity release plan to discuss your plans and find out what process you will need to follow.

3. Get a Property Valuation

The next step is to get a valuation for your property. Usually, the lender will require an independent valuation of the property, completed by a qualified and registered RICS valuer. Your agent may still be able to negotiate a higher asking price for the property, but your equity loan provider will often require a RICS valuation rather than an estate agent valuation.

4. Put Your Property on the Market

Once you have obtained the valuation, you will be able to put your property on the market with an estate agent. When deciding which estate agent to choose, a local agent will have an in-depth understanding of the local market and lots of experience selling similar properties. You should also look for an agent with a good marketing strategy, advertising on the main property portals, as this will help to generate more interest in your property.

5. Accept an Offer and Start Legal Work

Once you receive an offer that you are happy with, you can instruct your estate agent to accept the offer, and your conveyancer can start with the legal processes including drafting contracts and then transferring funds. Working with a conveyancer who specialises in equity release property conveyancing will help the sale process go as smoothly as possible.

6. Repay the Equity Release Loan

Once the exchange of contracts is completed, the conveyancer will handle the financial transactions, starting with transferring the outstanding money to the equity release provider, including any early repayment charges and interest. Once the equity release loan is repaid, any remaining funds from the proceeds of the sale will be transferred to you.

7. Move to Your New Home

Once your equity loan has been repaid you will be free to start the next chapter and move to your new home. Whatever your next plans are, you will no longer be tied to your equity release plan and will have the freedom to move to a new area if that is what you are looking to do.

If you are looking to sell a property with equity release or can’t pay your mortgage in Bromley, Soho, Marylebone or Notting Hill, our boutique agency can help you to navigate the additional complexities. Get in touch with our experienced central London property sales team for more information.