What happens to equity release when you die?

When you die, any equity release taken out against your home must be repaid. This is usually done through the sale of the property.

How the repayment works can depend on the type of product you have. For example, it may differ if you’ve taken out a Lifetime Mortgage or entered into a home reversion plan. 

Thinking about what happens to your home and finances after you die is never easy. If you’re considering equity release, it’s natural to want reassurance about what it could mean for you and your loved ones. 

This guide explains what typically happens to an equity release plan when you die, although this can vary depending on your provider and the terms of your plan.

What is equity release?

Equity release is a way for UK homeowners aged 55 or over to access some of the value tied up in their home, without having to move out.

The most common type of equity release is a Lifetime Mortgage. This is a loan secured against your home that’s usually repaid when the last homeowner dies or moves into long‑term care. Also, note that it will reduce the value of your estate and may affect your entitlement to means-tested benefits.

What usually happens to equity release when you die?

With a Lifetime Mortgage, the loan does not usually need to be repaid immediately. The executor is normally given time to deal with the estate and arrange repayment, which is often achieved through the sale of the property.

In most cases:

• The provider is notified of the death
• The executor of the estate is given time to make arrangements 
• The loan is typically repaid from the sale of the property

Any remaining value after the loan and interest have been repaid would then form part of the estate.

Will my family have to repay the debt?

Your family are not personally responsible for repaying an equity release loan.

The loan is secured against the property, not against your family members. This means repayment usually comes from selling the home, rather than from other assets or income.

Many plans offered by Equity Release Council members also include protections designed to support customers and their families. The Equity Release Council is the industry's trade body and sets product standards that its members must follow.

What if I have a partner or spouse?

If you take out equity release jointly with a partner or spouse, the amount owed usually only becomes repayable when the last surviving homeowner dies or moves into long-term care.

This means the surviving partner can normally continue living in the home for the rest of their life, as long as the terms of the plan are followed.

Depending on the plan, there may also be flexibility around repayment fees if one homeowner dies. Your adviser can explain any features that apply to your circumstances.

Can my family keep the house?

In some cases, beneficiaries may choose to keep the property rather than sell it.

This may be possible if:

• The equity release plan is repaid in full through another method 
• Any interest owed is also cleared
• The provider’s conditions are met

Your adviser can explain how this might work and whether it would be an option based on your circumstances.

How does equity release affect inheritance?

Equity release will reduce the value of your estate.  With a Lifetime Mortgage, the loan and any interest will build up over time and needs to be repaid first before any remaining amount can be paid to your beneficiaries.

This means:

• Equity release will reduce the value of your estate, which may mean there is less to pass on to your beneficiaries.
• The impact will depend on how much is released, how long the plan runs, and future house prices 

Some people choose equity release knowing this, prioritising their needs in later life, while others decide it isn’t the right option for them. There’s no single right answer as it’s about what works for you.

What about inheritance tax?

Releasing equity from your home could affect the amount you’re able to leave behind, which may have implications for inheritance tax (IHT). How this applies will depend on your individual circumstances and the value of your estate at the time of death.

Royal London Equity Release Advisers do not provide inheritance tax advice. Tax advice is not regulated by the Financial Conduct Authority. If you're unsure about the inheritance tax implications of equity release, speak to a qualified tax specialist or financial adviser.

Why advice is necessary

Equity release is a long-term financial commitment, so it's important to understand both the benefits and the risks.

The information on this page has been provided by Royal London Equity Release Advisers to help you understand more about equity release. They are authorised and regulated by the Financial Conduct Authority to give equity release advice. Royal London Group introduces customers to Royal London Equity Release Advisers who will make recommendations based on individual circumstances, after considering products from the whole market.

Speaking with Royal London Equity Release Advisers can help you decide what's right for your circumstances. Their support can help you:

• Understand how equity release works
• Explore alternatives
• Consider the impact on your estate and loved ones
• Decide whether it's the right option for you.