fbpx

equity release what happens when you die

Equity Release – What happens when you die

Retiring from your job can be very stressful especially if you have not figured out how you will support your expenses.

Equity release is a favourable option for many people as it provides a reasonable financial boost. However, getting a loan against your property will always evoke questions of what will happen when you die. Additionally, it’s important to know what your loved ones need to do after you die.

What is equity release?

Equity release gives you the option to borrow money from your property and still maintain 100% ownership of the property.

The money given is the equity that has built up on the property over the years. Most people go for a Lifetime Mortgage, Drawdown Lifetime Mortgage or Home Reversion plan.

You can read more about how equity release works here.  Alternatively, here is a short video.

How quickly must the equity release plan be paid after death?

After the last owner of the property dies or moves to a nursing home, the beneficiaries must inform the equity release providers.

They need to show them the death certificate, and other related documents, as this is to ensure that the lenders know that they now need to deal with you with regards to repayment of the equity release mortgage.

The equity release plan typically needs to be paid within a 12 month window period. Some estates decide to put the house on sale to get the money to pay the provider. Others opt to put the house up for rent as this ensures that the provider gets a certain amount at the end of the month. However, if you are looking to sell the house then having tenants could cause some challenges.

A point to note is that the interest keeps on the building during those 12 months. If the money can’t be repaid within the 12 months, the provider talks it through with the beneficiary to come up with a new plan to be able to pay the money. Ultimately the provider is able to repossess the house if the money is not paid back.

What happens to your spouse when you die?

If you had applied for joint plans when taking up an equity release plan, then your spouse will continue living in the house until they die or move to a nursing home.

When taking out the equity release, you should ensure that you indicate on your documents that you want a joint plan. If not, your spouse might be forced out of the house at an earlier stage than you may have anticipated. This can be very devastating to them to be forced out of their home and can in some circumstances lead to depression.

To ensure that your spouse is taken care of even when you are not alive, we would suggest that you do look in to the benefits of having a joint plan.

Is there any need for a solicitor in case one spouse dies?

Depending on the complexity of the affairs of the person that died, there may be a need to apply for probate.  In this circumstance you will probably need to engage with a probate specialist or solicitor.

In the case of a joint plan, and one spouse dies, the other partner in the agreement will continue taking responsibility for the equity release ( assuming they are receiving regular payments) until they die or move to a nursing home.

You might also choose to involve the solicitor once both the partners have died.

You can also choose to get advice from a financial advisor.

A financial advisor can help you come up with a plan on how to pay the lenders money back. They can also help you find out of some benefits that can help you out with additional income to help you pay the providers money.

How equity release affects your inheritance after you die

Most people opt for equity release as a way to sustain their livelihood.

Equity release can be very helpful if you have no other source of income. However, they do impact your inheritance after you die, as quite simply you wont have a house to pass on. This means that your family don’t get to inherit your home, which is something neither you nor the family may want.