How to Sell a House With a Reverse Mortgage

Equity release felt like a smart move at the time. You unlocked cash from your home, stayed put, and life carried on.

But now you need to sell.

Maybe you’re downsizing. Maybe you’re moving closer to family. Maybe the house is just too much to manage.

Whatever the reason, you’re probably wondering: can I even sell a property with a lifetime mortgage hanging over it?

The short answer is yes. But there are a few things you need to understand first — especially around early repayment charges and how much of the sale price you’ll actually keep.

Here’s everything you need to know.

What Is Equity Release (and Why Does It Matter When Selling)?

Equity release lets homeowners aged 55 or over access the value tied up in their property without having to move out.

There are two main types:

Lifetime mortgage — the most common form. You borrow a lump sum (or draw down smaller amounts) secured against your home. Interest rolls up over time, and the loan is repaid when you die, move into long-term care, or sell the property.

Home reversion plan — you sell part or all of your home to a provider at below market value in exchange for a lump sum or regular payments. You retain the right to live there rent-free for life, but you (or your estate) only receive the remaining share when the property is eventually sold.

Here’s what catches most people out: compound interest.

With a lifetime mortgage, interest typically sits between 5.97% and 6.28% (as of early 2026). Because you’re not making monthly repayments, that interest compounds — rolling up on itself year after year.

A loan of £80,000 at 6% could grow to roughly £143,000 over 10 years if you make no repayments. That’s a significant chunk of your equity quietly disappearing.

This is exactly why selling with equity release needs careful planning.

Can You Actually Sell a House With Equity Release?

Yes. There’s no rule stopping you from selling a property with a lifetime mortgage or home reversion plan.

With a lifetime mortgage, the loan must be repaid in full from the sale proceeds — including all the interest that’s built up. The reassuring part: if you took out your plan through an Equity Release Council-approved provider, you’re covered by the no negative equity guarantee. This means you (or your estate) will never owe more than the property sells for — even if the rolled-up interest has grown beyond the property’s value.

With a home reversion plan, there’s no loan to repay. Instead, the sale proceeds are split according to the ownership shares you agreed with the provider. If you sold 50% of your home, the provider receives 50% of the sale price and you keep the rest.

The Equity Release Council updated its standards in May 2025 (Standards 2.0), adding a sixth safeguard. All council-approved plans now guarantee:

1. No negative equity guarantee — you’ll never owe more than the sale price
2. Fixed or capped interest rates for the life of the plan
3. The right to port your plan to a new property
4. The right to make voluntary overpayments without penalty
5. Secure tenure for life — you can stay in your home
6. ERC waiver for care — if you move into long-term care or a relative’s home to receive care (with a medical certificate)

After the loan is repaid, any surplus from the sale is yours to keep.

How to Sell a House With Equity Release (Step by Step)

Step 1 — Get Your Settlement Figure

Contact your equity release provider and request a settlement figure. This tells you exactly how much you owe — the original loan plus all accrued interest, and any early repayment charges that apply.

Settlement figures are typically valid for around 28 days, so time your request carefully.

Step 2 — Get a Property Valuation

Get a proper valuation from a qualified surveyor or estate agent. You need to know what your property is realistically worth — not what you hope it’s worth.

This is crucial. The gap between your settlement figure and the property’s market value is what you’ll actually walk away with.

Step 3 — Choose How to Sell

You have three main options:

Estate agent — the traditional route. Maximises your sale price but typically takes 4-6 months from listing to completion. Estate agent fees average around 1.42% including VAT (HomeOwners Alliance, 2025).

Auction — faster, with exchange happening on the day. But you’ll pay auction fees, and the final price is unpredictable.

Cash buyer — the fastest option. Companies like Property Rescue can complete a purchase in as little as 2-4 weeks. You’ll receive a lower price (typically 75-85% of market value), but there are no fees, no chain, and no risk of the sale falling through. We cover the legal fees, too.

The right choice depends on how much time you have and how much equity you need to preserve.

Step 4 — Complete the Sale and Repay the Lender

Your solicitor handles the repayment. On completion day, the sale proceeds go to your conveyancer, who pays off the equity release provider directly. The remainder comes to you.

It works the same as paying off a standard mortgage on sale — just with a potentially larger balance because of compound interest.

Early Repayment Charges — What Will It Cost You?

This is where most sellers get a nasty surprise.

Early repayment charges (ERCs) are penalties for repaying your equity release before the natural end of the plan (death or long-term care). They’re designed to compensate the lender for lost interest income.

Fixed ERCs — the most common type. They typically start at 5-10% of the outstanding balance and taper down each year. After 8-10 years, many plans reduce the ERC to zero.

For example, a plan might charge:

Gilt-linked ERCs — tied to government bond yields. If gilt yields have risen since you took out the plan, you may pay no ERC at all. If they’ve fallen, the charge could be significant. These are harder to predict.

Downsizing protection — some plans include this as a built-in feature. If you’ve held the plan for at least 3-5 years (depending on the provider) and you’re downsizing to a property that doesn’t meet the lender’s criteria for porting, you can repay without any ERC.

The Equity Release Council reports that approximately 70-75% of new lifetime mortgage products now include downsizing protection (Q1 2026). But check your specific plan — older plans may not have this feature.

Can You Move Your Equity Release to a New Property?

If you’re not selling up entirely — just moving — you may be able to port your lifetime mortgage to the new property.

Porting means transferring your existing equity release plan to your next home. Under Equity Release Council standards, you have the right to port, provided the new property meets the lender’s criteria.

But there are conditions:

• The new property must meet the lender’s minimum value and property type requirements
• Some lenders exclude retirement flats, sheltered housing, high-rise properties, or non-standard construction
• If the new property is worth less than the current one, you may need to repay the difference — potentially triggering ERCs on that portion

Porting is often the smartest move if you’re downsizing and want to avoid ERCs entirely. But it only works if your new home ticks all the lender’s boxes.

Speak to your equity release adviser before making any assumptions.

What Are the Downsides of Selling With Equity Release?

Let’s be honest about the risks:

Compound interest reduces your equity. The longer you’ve had the plan, the more interest has rolled up. After 15-20 years, the outstanding balance can easily exceed the original loan amount — sometimes by two or three times.

ERCs can eat into your proceeds. If you’re selling within the first few years, early repayment charges can take a significant bite. On a £100,000 balance, a 10% ERC means you’re losing £10,000 before you’ve even paid the estate agent.

Your property choices may be limited. If you want to port rather than repay, you’re restricted to properties your lender will accept. That rules out certain property types and can limit where you move.

You may have less to leave behind. Selling with equity release often means a smaller inheritance for your family. It’s worth having an open conversation with your beneficiaries before making decisions.

None of these are reasons not to sell. They’re reasons to sell with your eyes wide open.

Alternatives Worth Considering

Not every homeowner with equity release needs to sell. Here are some options worth exploring:

Downsizing without repaying — port your plan to a smaller property and keep the equity release in place. This avoids ERCs and keeps your arrangements intact.

Voluntary overpayments — many modern plans let you repay up to 10% of the outstanding balance each year without penalty. If you’ve got time, chipping away at the balance before selling reduces the amount owed.

Selling to a cash buyer — if speed matters more than price, a cash buyer can complete in weeks rather than months. At Property Rescue, we’ve worked with homeowners who needed to sell quickly because of health changes, family circumstances, or simply wanting to move on. We handle the legal side and cover the basic conveyancing costs.

Because of our Sale and Rent Back service, we’re one of the only house buying companies in the UK that’s regulated by the FCA (FCA Register 522471). That matters when you’re making a significant financial decision about your home.

Remortgaging — in some cases, switching from a lifetime mortgage to a standard interest-only or repayment mortgage could be an option. This typically requires meeting income and affordability criteria, so it won’t suit everyone — but it’s worth asking an independent financial adviser about.

Tax and Inheritance — What You Need to Know

A few important points on tax:

Equity release funds are tax-free. The money you received from your lifetime mortgage was not taxable income. That doesn’t change when you sell.

Your main home is exempt from Capital Gains Tax. Private Residence Relief means you won’t pay CGT on the sale of your primary residence, regardless of how much it’s gone up in value.

Equity release can reduce your inheritance tax bill. The outstanding loan is treated as a liability against your estate. A property worth £500,000 with an equity release balance of £150,000 means only £350,000 is counted towards the estate value for IHT purposes. With the nil-rate band at £325,000 and the residence nil-rate band at £175,000, this could take a modest estate below the threshold entirely.

Watch out for the 7-year rule. If you gave away any of the equity release funds to family members, those gifts may still count towards your estate for IHT if you die within seven years of making them.

Get a free, no-obligation cash offer from Property Rescue. No fees. No legal pack. No risk. Call 020 8634 0224 or get your free cash offer online.