Equity Release: What Happens When Someone Dies?

Equity release allows homeowners to unlock cash from the value of their property while continuing to live in it. The two main types are a lifetime mortgage (the most common), where the homeowner borrows against the property and interest rolls up over time, and a home reversion plan, where part or all of the property is sold to a provider in exchange for a lump sum or regular payments. When someone who held one of these plans dies, the executor must act. The loan does not disappear on death and must be repaid from the estate. This guide covers what that involves.

Notifying the lender

Contact the equity release lender as soon as possible after the death, even before probate has been applied for. Most lenders have a dedicated bereavement team. You will need to provide a copy of the death certificate and confirm your role as executor. At this stage, ask the lender for:

• The outstanding balance as at the date of death
• A breakdown of how interest has been calculated to that date
• Their procedure for repayment and the timescales they expect
• Whether any extensions are available if the property takes time to sell

Getting this information early allows you to plan the estate administration and means there are no surprises when it comes to calculating the net estate value.

Repayment timelines

Most equity release plans that comply with Equity Release Council standards give the estate 12 months from the date of death to repay the loan in full. This is a standard term rather than a legal deadline, but lenders will typically expect you to be making progress within that window. Interest continues to accrue during this period, which means the longer repayment takes, the larger the total balance will be.

If the property is on the market but taking time to sell, many lenders will consider an extension to the repayment period. You will usually need to provide evidence that the property is listed for sale at a reasonable price. Contact the lender proactively rather than waiting for the deadline to arrive.

How repayment works

For the large majority of estates, the equity release loan is repaid by selling the property. The lender holds a legal charge over the property, which means they are a secured creditor. Their debt is repaid from the sale proceeds before anything passes to beneficiaries. The conveyancing solicitor handling the sale will arrange for the lender's charge to be redeemed at completion and the balance released to the estate.

In theory, the estate could repay the loan using other estate funds without selling the property, for example if a beneficiary wanted to keep the property and the estate had sufficient cash. This is much less common, but it is an option worth exploring if the circumstances allow. Speak to the lender about the early repayment terms before proceeding this way, as some plans carry early repayment charges.

For guidance on managing the property sale, see our guide to selling property during probate.

Joint plans: what happens when one borrower dies

Many equity release plans are taken out on a joint basis, for example by a married couple where both names appear on the plan. In this case, the plan is usually structured so that it does not need to be repaid until the second borrower dies or moves permanently into long-term care. The surviving co-borrower has the right to remain in the property under the terms of the plan.

As executor of the first borrower's estate, you will usually not need to act on the equity release at this stage. Your duties as executor are to account for the plan as a liability of the estate and notify the lender of the death, but the plan itself continues for the surviving borrower. The outstanding balance will typically need to be declared as a liability for inheritance tax purposes on the first death, but the lender will confirm the position.

The no-negative-equity guarantee

All plans that comply with Equity Release Council standards include a no-negative-equity guarantee. This means the estate will never owe more than the property is worth at the time of sale, regardless of how much interest has rolled up. If the outstanding loan balance exceeds the sale proceeds, the lender absorbs the shortfall. Beneficiaries cannot be pursued for any deficit.

This guarantee is important to check. Most plans taken out since the Equity Release Council introduced this standard carry the guarantee, but older plans, particularly those arranged before 2012, may not. Check the original plan documentation carefully. If you are unsure, ask the lender directly in writing whether the plan carries the guarantee, and keep their response on file.

Older plans not covered by the Equity Release Council

Plans arranged before the Equity Release Council's standards were widely adopted may have different terms. Without the no-negative-equity guarantee, it is theoretically possible for the outstanding balance to exceed the property value. If you are dealing with an older plan and cannot find the original documentation, contact the lender and ask them to confirm the key terms in writing before proceeding with the estate administration.

Inheritance tax

The outstanding equity release balance on the date of death is a debt against the estate. For inheritance tax purposes, this reduces the value of the estate. If the deceased owned a property worth £400,000 and had an outstanding equity release balance of £120,000, the net value of the property for IHT purposes is £280,000. This can make a significant difference to whether the estate falls above or below the inheritance tax threshold.

The property must be formally valued as at the date of death for probate purposes. A RICS-qualified surveyor's valuation is the standard approach. The equity release debt is then deducted when calculating the taxable estate. Our inheritance tax guide covers the thresholds, reliefs, and how to report to HMRC.

Valuing the property

Even where the equity release balance substantially reduces the estate's IHT exposure, you are still required to obtain a date-of-death valuation of the property for the probate application. HMRC may check this valuation and can challenge it if they consider it too low. Use a local estate agent's written valuation or a RICS surveyor's report. If the property is unusual or valuable, a professional RICS valuation is the safer approach. See our guide to probate and property for more on property-related probate requirements.

Selling the property: what the executor can do before probate

You can instruct an estate agent and market the property for sale before probate is granted, and you can accept an offer. However, you cannot complete the sale until the Grant of Probate is in hand. HM Land Registry will not register a transfer of ownership without it. When instructing the estate agent and any conveyancing solicitor, tell them clearly that there is an equity release plan to be redeemed from the proceeds at completion. This allows the solicitor to request a redemption statement from the lender and include the repayment in the completion accounts.

Our guide to selling property during probate covers the full process in detail.

Getting help

For most estates with equity release, the process is straightforward: notify the lender, apply for probate, sell the property, and use the proceeds to redeem the loan. Where the loan is large, the plan terms are unclear, or the estate is otherwise complex, it is worth consulting a solicitor with experience of estate administration. Read our guide to executor duties for a full overview of your responsibilities.

The Equity Release Council publishes guidance on its standards and maintains a register of compliant providers. If you are unsure whether the plan in question is Equity Release Council compliant, the Council can often help you check.