Equity release allows homeowners aged 55 and over to unlock tax-free cash from their property without the need to sell or move. But what happens to the loan when you pass away? Many homeowners worry about how equity release will affect their estate and what their beneficiaries will need to do. In this article, we’ll explain exactly how equity release works when you die, including how repayments are handled, what happens to your home, and how your loved ones are protected.
What Happens to Your Equity Release Loan When You Pass Away?
If you have a lifetime mortgage, the most common type of equity release, the loan and any interest accrued are repaid after you die. The repayment is usually made from the proceeds of the sale of your home.
Here’s how the process works:
- The lender is notified of your passing – Your executors or next of kin will need to inform the equity release provider.
- A valuation of the property is arranged – The lender will assess the market value of your home.
- The property is sold – The loan, including any accumulated interest, is repaid from the sale proceeds.
- Any remaining equity goes to your beneficiaries – After the debt is cleared, any leftover funds are passed on to your estate.
Your family or estate beneficiaries will typically have 12 months to settle the loan, providing them with enough time to arrange the sale or find alternative repayment options.
Will Your Family Be Left in Debt?
A major concern for many homeowners is whether their family could end up owing more than the value of the property. However, thanks to the No-Negative Equity Guarantee, which is a standard feature of equity release products offered by members of the Equity Release Council, this cannot happen.
- Your estate will never owe more than your home’s sale value – Even if property prices fall and the loan exceeds the sale proceeds, the lender will write off any remaining balance.
- Your beneficiaries won’t inherit any equity release debt – The repayment is limited to the value of the home.
This safeguard ensures that equity release is a safe and secure option for homeowners looking to access their property wealth while protecting their family’s financial future.
What If Your Family Wants to Keep the Property?
In some cases, your family may wish to keep your home rather than sell it. This is possible, but they will need to repay the equity release loan using other means, such as:
- Using savings or inheritance funds
- Taking out a traditional mortgage
- Using proceeds from another property sale
Your family will have up to 12 months to repay the loan before the lender requires the home to be sold.
What If You Have a Joint Equity Release Plan?
If you have a joint equity release plan with your spouse or partner, the loan does not need to be repaid when the first person dies. Instead:
- The surviving homeowner can continue living in the property for life or until they move into long-term care.
- The loan is only repaid when the last surviving homeowner passes away or enters care.
This ensures that couples remain financially secure and are not forced to sell or move due to an unexpected loss.
Does Equity Release Affect Your Inheritance?
Yes—equity release will reduce the value of your estate because the loan, plus interest, must be repaid before any inheritance is distributed to your beneficiaries. However, there are ways to manage this impact:
1. Inheritance Protection
The majority of equity release plans allow you to ring-fence a portion of your home’s value to pass on to your beneficiaries. This ensures that a set percentage of your estate remains untouched.
2. Making Voluntary Repayments
Many lifetime mortgage plans allow you to make partial repayments over time, reducing the total amount owed. This can help preserve more of your estate for your loved ones.
3. Future House Price Growth
If property prices continue to rise, the remaining value of your estate after repaying the equity release loan could still be significant.
To understand how equity release could affect your inheritance, speak to a specialist via our Equity Release Adviser page.
FAQs About Equity Release After Death
How Long Does My Family Have to Repay the Loan?
Your family typically has 12 months to settle the loan.
Will My Family Inherit Debt from My Equity Release Plan?
No. The No-Negative Equity Guarantee ensures that the estate will never owe more than the value of the home.
What If My Family Wants to Keep the House?
They can repay the loan using other funds (savings, inheritance, or a new mortgage) instead of selling the property.
What If I Have a Joint Equity Release Plan?
The surviving partner can stay in the home—the loan is only repaid when the last homeowner passes away or moves into care.
How Can I Minimise the Impact on My Inheritance?
Options include inheritance protection, voluntary repayments, and benefiting from potential house price growth.
Next Steps
Understanding what happens to your home and loan after you pass away is an essential part of equity release planning. To explore your options and how it could impact your estate:
- Speak to an expert on our Equity Release Adviser page.
- Use our Equity Release Calculator to estimate how much you could unlock.
- Read more about equity release in related articles:
By understanding the process, you can ensure that your loved ones are prepared and protected when the time comes.
