Equity Release: What happens when you die?

We don’t like to think about what will happen when we are no longer here. However, understanding what happens to equity release when you die is important, as the mortgage will usually be repaid after your death or if you enter long-term care.

Equity release has enabled many homeowners to enjoy a better quality of life in retirement, help their children financially or navigate difficult financial situations by releasing funds tied up in their property.

Although monthly repayments are not usually required, the money will eventually need to be repaid, so it is important to understand how the process works.

What happens to your equity release when you die?

In most cases, the loan is repaid when your property is sold after you move into long-term care or pass away.

If the equity release plan is solely in your name, the lender will typically allow the executor of your estate up to one year to sell the property at a reasonable market value.

Once the property has been sold, solicitor’s fees, estate agent’s fees and other associated costs are paid. The remaining proceeds are then normally used to repay the outstanding equity release loan.

Any funds left after the loan has been settled can then be distributed to your beneficiaries in accordance with your will.

If there are sufficient funds elsewhere within your estate to repay the equity release loan, the executor may decide to settle the debt without selling the property.

If you have taken out a joint equity release plan with your partner, repayment is not normally required until the last surviving homeowner named on the property deeds has either moved into long-term care or passed away.

After that, the repayment process follows the same steps as it would for an individual equity release plan.

How can you use the money from equity release?

You are generally free to use the money released from your property however you choose.

Some people use it to purchase a second home, while others choose to provide an early inheritance for their children, carry out home improvements or supplement their retirement income.

One important consideration is that any existing traditional mortgage or secured loan on the property will usually need to be repaid when taking out an equity release plan.

Understanding what happens to equity release after your death is an important part of deciding whether it is the right option for you, particularly when considering the impact on your beneficiaries.

A useful starting point is to use an Equity Release Calculator to estimate how much you could release and whether equity release is likely to be suitable for your circumstances.