What happens to an equity release plan once the holder moves into care? Mark Gregory runs through the process and explains how it can provide clarity for family members and loved ones
The Question
I need some advice and hope you can help. My Uncle has become unwell, and we are planning to move him to a home.
He owns a house which he has recently told us has an equity release plan attached to. He has very little in the way of income to cover his care home fees, so we were planning to sell the house.
But now we have heard about the equity release plan, we wondered if this might change things somewhat.
Please could you guide us on our next steps so we can firstly find out more about the equity release plan and then decide what to do next. Presumably the equity release loan will need to be repaid first and then any additional money will be his to pay for the care. But we would value your insight.
Mark’s Answer
I’m sorry to hear about your Uncle’s health, and I hope he gets the care and support he needs in his future residential home.
You’re right to ask this question – it’s one that comes up often when a homeowner with an equity release plan is moving into long-term care. The good news is that this situation is well understood by equity release providers, and the process is generally straightforward once you know what steps to take.
What happens to the plan?
A lifetime mortgage – the most common type of equity release, is secured against the homeowner’s main residence. When the borrower passes away or permanently moves into long-term care, the plan effectively comes to an end and the loan balance becomes repayable.
In most cases, the home is sold, and the equity release loan is repaid from the proceeds. Any remaining money after the loan is cleared belongs to the homeowner (if still living) or forms part of their estate.
Are there penalties for repaying early?
No. If your Uncle is moving into long-term care permanently, then no early repayment charges (ERCs) apply. These charges are waived in cases of death or entry into care – a consumer safeguard built into all Equity Release Council-approved plans.
What should you do next?
Here are the steps I recommend:
1. Contact the plan provider
They will confirm the current loan balance and explain the process for settling the account. If your Uncle has capacity, he can give permission for them to speak to you. Otherwise, they may need to see a registered Power of Attorney document before releasing information to you.
2. Look for annual statements
Most providers send customers an annual statement showing how much is owed. If your Uncle has retained paperwork, this could give you a useful snapshot of the current balance.
3. Confirm ownership and responsibilities
If you’re planning to manage the property sale, ensure any legal authority is in place – again, via Power of Attorney or acting as executor if applicable.
4. Speak to a specialist adviser
At Equity Release Supermarket, our advisers are experienced in these sensitive situations and can help guide you through the process. With your Uncle’s permission (or legal authority), they can also contact the provider on your behalf and help you explore next steps, including options for care funding.
Equity release shouldn’t complicate your Uncle’s move into care – in fact, it may offer more clarity than you’d expect. Once the plan is repaid from the sale of the house, any remaining funds can help contribute toward his care costs and ongoing wellbeing.
If you’d like expert support, feel free to contact us on 0800 802 1051 or reach out via our care funding help page.
Meet our expert…
Mark Gregory, founder and CEO of Equity Release Supermarket, is here to answer your questions. Mark is an adviser himself with over 20 years equity release experience.
He launched Equity Release Supermarket 10 years ago and it has grown to become one of the UK’s leading equity release specialists.
Email kate.saines@emap.com to ask Mark a question
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