Can I Rent out My House with Equity Release? Property Laws

Are you interested in equity release but not sure if you can rent out your house once you've got it? It can be a bit confusing, but we're here to help. In this article, we'll go through:

• What equity release is and its purpose.
• How to get a realistic quote and qualify for equity release.
• The pros and cons of different equity release plans.
• The property laws around renting a house with equity release.
• The benefits of using an Equity Release Council (ERC) member.

We understand that the process of equity release can seem daunting, but don’t worry; we have a lot of advice to guide you. We’re here to help you figure out if equity release is the right choice for you and your home.

Let’s dive in and discuss your options.

Can you do equity release on a rental property?

Standard residential equity release normally requires the property to be your main home. Borrowing against a rental or holiday property is a different specialist question; check actual availability with an adviser.

Moving out permanently or letting the property can breach a residential plan’s terms and trigger repayment. The precise occupancy rules and any permitted exceptions depend on the contract.

Can you let a property with equity release?

Do not let the property without checking the plan and obtaining any required written consent. Whole-property letting is normally incompatible with a standard main-residence lifetime mortgage.

Moving out may require repayment and charges, but the amount depends on the plan, exemptions and whether an approved move is possible. It is not universally unaffordable.

If you stop living at the property and try to secretly rent it out without your lender knowing, you could end up in big trouble and in significant immediate debt. This situation should be avoided.

Can I have a tenant with equity release?

Most equity release providers do not allow the homeowner to have a third party tenant living in the property. 

It’s important to understand the agreeable definition of a ‚Äòtenant’. A tenant is usually someone who has exclusive access to rooms of the property where the homeowner is not allowed to go. 

Whether an occupier is a tenant depends on the legal arrangement and facts, including exclusive possession. A lock or an annexe alone does not settle the question; get legal advice and lender consent.

Can I have a lodger with equity release?

Some providers permit lodgers under conditions. Obtain written consent before taking one in and check insurance, occupancy limits and any required documents.

A lodger normally rents accommodation in a resident landlord’s home. Their rights depend on the arrangement; excluded occupiers still have contractual rights and usually require reasonable notice.

A lender may require an occupier’s consent or waiver, but that does not mean every legal right disappears. Ending occupation must follow the applicable agreement and law.

Can you sell a house that has equity release?

You may be able to sell and repay or port the plan. Obtain a redemption statement, check early-repayment charges and exemptions, and get legal and financial advice.

However, if you are selling the home to move to a new one, you might be able to take your equity release plan or lifetime mortgage with you. The ERC states that any homeowner must be allowed to move home to a suitable property and take the equity release plan with them. But what is classed as suitable?

The new property must meet the provider’s criteria. Equal or higher value alone does not ensure acceptance, and a cheaper home may be possible with partial repayment.

Downsizing protection is product-specific and may have waiting periods or other conditions. It cannot always be added later or guarantee charge-free downsizing.

Want more information about equity release and your homeowner rights? Find out more on our other free MoneyNerd guides. We have scores of articles on this subject!