Equity release - what happens if I die?

Research from leading mortgage broker, Henry Dannell, reveals that 39% of over-55s who have equity release plans are unaware of what happens to their plan if they were to die. 

Equity release enables older people to cash in the wealth that is tied up in their property assets. This can be done in one lump sum, or paid in a series of instalments. 

Equity release is an increasingly popular way of unlocking personal wealth later in life and since the start of the pandemic, 150,653 of over-55s have chosen to release equity from their homes. 23,395 did so in Q1 of this year alone, 12,174 of which were new customers - a 21% increase on the previous year. 

A survey of over-55s who have equity release plans commissioned by Henry Dannell found that the most common reason for taking out a plan was to fund renovations or improvements to their home and garden, as attested to by 33% of respondents. 

17% said they took out a plan in order to make a mortgage repayment, 16% said it was to fund general debt repayments, and 14% said their motivation was to be able to ‘gift’ money to a family member or loved one.  

Meanwhile, 12% said they wanted to fund a major purchase, such as a car, and 7% said they wanted to use the money to pay for a holiday.

While their intentions are clear and they know exactly why they’ve taken out a plan, the survey also reveals that 39% of equity release customers are unaware of what happens if they were to die or are moved into long-term care. 

What happens to my equity release plan when I die?

Put simply, your equity release plan must be repaid upon your death. Your direct beneficiaries are required to inform the lender of your passing and, in most cases, they will be given 12 months to repay your plan. This is often funded through the sale of your property but can be funded in other ways if desired.

What do my loved ones need in order to settle my plan?

You will have been given a plan reference number. This needs to be kept in a safe place and your beneficiaries need to know where it is. They will need to provide this when informing the lender of your passing. They will also need to provide a copy of your death certificate and the probate document.

What about my surviving partner?

If you want your surviving partner to be able to remain living in your home, you need to make sure the mortgage - or home reversion plan - is written in both of your names. This will ensure that they can continue living in the home for the rest of their life or until they enter long-term care.

Can I pay back my equity release plan before I die?

Yes, you can. Nothing requires you to stick with your plan until the completion date. But, it’s important to know that if you choose to repay your plan before the agreed end date, there might be an early repayment charge. 

Director of Henry Dannell, Geoff Garrett, commented:

“Death is not something many of us want to frequently consider, but when you’re an equity release customer, it is really important to have a good understanding of what happens to your plan if it is not paid off before you die.

“Equity release is a great way of freeing up some cash to best enjoy your later life or pass on some of your wealth to loved ones before your passing. It is always good to think carefully about what happens if you die sooner than expected. You don’t want to saddle your loved ones with money worries, so it is best to make sure you have assets that can be sold to cover the money owed. This means that your loved ones can easily pay off your plan without stress or concern .

“Always consult an expert when considering equity release, read the small print carefully, and make sure someone knows where your paperwork is filed.”