Lifetime mortgages, a form of equity release, can be an option for homeowners aged 55 and over. A lifetime mortgage allows you to release equity from your property without having to move or make monthly repayments. But what happens if you want to move house after taking out a lifetime mortgage? Can the loan be transferred to another property? This is a question that many people considering a lifetime mortgage will ask, and understanding the terms and conditions around portability is essential before committing to this type of equity release loan.
In this article, we’ll explore what a lifetime mortgage is, how it works, and whether it’s possible to transfer the loan to a new property. We’ll also consider the potential benefits and drawbacks of transferring a lifetime mortgage and what you need to know before making a move.
What is a Lifetime Mortgage?
A lifetime mortgage is a type of equity release product which allows homeowners aged 55 or over to access the equity tied up in their property without having to sell it. Essentially, you borrow money against the value of your home, with the loan typically repaid when the last borrower passes away or moves into long-term care. Interest rates on the loan are typically fixed for the life of the loan.
Lifetime mortgages come with a few key features:
No required monthly repayments:
The loan is repaid in full, including any accrued interest, when the property is sold, typically upon the death of the last surviving borrower or when they move into permanent residential care.
Interest roll-up:
Interest is added to the loan amount and compounds over time, meaning the balance grows, but you don’t need to make repayments until the loan is settled.
Optional monthly payments:
You have the option to make payments on a flexible basis or monthly basis, subject to certain limits. Early repayment charges may apply above a set value. Making payments, if you can afford to do so, means you will save your estate money and leave more for your beneficiaries or for care costs.
Age limits:
To qualify, you must be at least 55 years old.
No negative equity guarantee:
Plans that meet the Equity Release Council’s product standards come with a no negative equity guarantee: This important guarantee means that you or your estate will never owe more than the property is worth when it is sold.
Can You Transfer a Lifetime Mortgage to Another Property?
The short answer is yes, in most cases, a lifetime mortgage can be transferred to another property, but there are conditions you need to be aware of. This is commonly referred to as “porting” the mortgage. However, transferring a lifetime mortgage is not always straightforward, and the ability to do so depends on several factors.
Conditions for Transferring a Lifetime Mortgage
The New Property Must Meet the Lender’s Criteria
Not all properties are eligible for a lifetime mortgage. When transferring the mortgage to a new property, it must meet the lender’s underwriting criteria in terms of location, age, condition and more. For example, a lender is unlikely to want to lend on a property that is in a high flood risk area or next door to a pub. The property you want to move to can be of lower or higher value. If you move to a property that is worth less than your current home, you may need to pay off a portion of the loan to make up the shortfall. In some instances, this payment may be penalty free.
The New Property Must Be in the Same Market
Lenders typically only allow the transfer of a lifetime mortgage to another property within the same market—meaning it must also be a residential home. For example, you can’t transfer the mortgage to a second home, a buy-to-let property, or a commercial property. The new property must meet the lender’s current underwriting criteria.
The Borrower’s Health and Age
The terms of your lifetime mortgage are largely based on your age and health at the time of the loan. If you move to a new property later on, your personal circumstances may have changed, which could affect the amount you’re allowed to borrow or the conditions of the loan. Lenders may reassess your circumstances when you apply to port the mortgage.
Equity Release Lender’s Policies
While equity release lenders offer portability, it’s essential to check the specific terms and conditions of your lender before assuming that porting the lifetime mortgage will be possible.
Equity Release Interest Rates and Terms
If you’ve had your lifetime mortgage for several years, the interest rate at the time you took out the loan may be different from current rates. When transferring to a new property, you may be able to switch to a new lender to achieve a lower interest rate, this will require advice from a qualified equity release adviser. Being able to change your plan, will depend upon whether you qualify for the latest plan developments, the amount outstanding on your equity release plan (including interest that has accrued) and any potential early repayment charges that may be applicable.
Costs Involved
Transferring a lifetime mortgage to a new property isn’t free of charge. Some lenders charge a non-refundable up front valuation fee. They may also charge an administrative fee and you are likely to have to cover the lenders legal costs of transferring the equity release to the new property. If there’s a shortfall between the value of the new property and the outstanding loan balance, you will need to pay that difference. If there is sufficient equity, this can be paid from the proceeds of your house sale.
Advantages of Transferring a Lifetime Mortgage
🟦| Downsize Protection: Some equity release lenders offer a feature called downsize protection. This means that if you want to move to a property that does not meet the lenders criteria, resulting in your being unable to port the loan, you may be able to repay the equity release in full without any early repayment charges. This can include properties outside the UK.
🟦| Flexibility: The ability to transfer your lifetime mortgage gives you more flexibility if you want to move to a different home. This is particularly useful if your circumstances change, such as if you downsize, move closer to family, or need to access a different type of property, such as a bungalow.
🟦| No Need to Repay the Loan Early: By transferring the lifetime mortgage, you avoid having to pay off the loan entirely, which would otherwise be required if you sold your home and didn’t port the loan to a new property. This is ideal for homeowners who need to retain access to the funds tied up in their property.
Disadvantages of Transferring a Lifetime Mortgage
🟦| Property Restrictions: As mentioned earlier, the new property must meet certain criteria. If you want to move to a property that doesn’t meet these criteria, such as one next to commercial premises, or a flat with a few years remaining on the lease, you may not be able to transfer the lifetime mortgage.
🟦| Fees and Costs: Depending on your equity release lender, there will be fees associated with transferring the lifetime mortgage. These could include a valuation fee, legal costs, administrative fees, or early repayment charges, which could add up and reduce the financial benefit of transferring.
What If You Can’t Transfer Your Lifetime Mortgage?
If your lender doesn’t allow the transfer or the new property doesn’t meet the criteria, you may have to repay the loan and any interest accrued when you sell your current property. This means you would need to pay off the loan balance from the sale proceeds and potentially seek another form of financing for your new home.
If this is a concern, it’s crucial to plan ahead. Speak with a qualified equity release adviser to fully understand the implications of equity release and whether a lifetime mortgage is the best option for your long-term financial goals.
Conclusion
Transferring a lifetime mortgage to another property is possible in many cases, but it comes with a set of conditions. The new property must meet the lender’s requirements, and you may face costs or adjustments to the loan terms. It’s important to carefully review your lender’s policies and consider speaking with a qualified equity release adviser to fully understand the options available to you.
If you’re considering a lifetime mortgage, ensure that portability is a feature you’re comfortable with and that it aligns with your future plans. The flexibility to move house without repaying your loan could be a significant advantage, but it’s important to understand the potential downsides, including the cost of transferring and the restrictions on the types of properties you can move to.
By understanding the process and working with a trusted adviser, you can make informed decisions and ensure your lifetime mortgage serves your needs as you move through retirement.
Contact Us
Contact us to speak to a certified equity release advisor today to see how a lifetime mortgage could work for you. We provide equity release advice and have access to plans across the whole of the market. We can identify if equity release is right for you and provide you with a tailored recommendation. We provide initial advice for free and without obligation. Only if you choose to proceed and your case completes would our advice fee of £1,695 be payable. Other lender and solicitor fees may apply. Equity release may involve a home reversion plan or a lifetime mortgage, which is secured against your property and will reduce the value of your estate and impact funding long-term care. To understand the features and risks, ask for a personalised illustration. Equity release requires paying off any existing mortgage. Any money released, plus accrued interest, would be repaid upon death or moving into long-term care.
