What Happens to Equity Release When You Die UK (2026)? Lifetime Mortgage on Death

A lifetime mortgage — the most common form of equity release in the UK — becomes repayable when the last remaining borrower dies or moves permanently into long-term care. The key events and process: (1) Repayment trigger: on the death of the last borrower (for a joint plan, both borrowers must have died or moved to care before repayment is required — the first death does not trigger repayment for a joint plan); (2) Notification: the executor must notify the lifetime mortgage provider promptly on being appointed. Most major providers (Aviva, Legal & General, Pure Retirement, more50s, Standard Life) have dedicated bereavement teams; (3) Repayment period: most Equity Release Council (ERC) standard plans allow 12 months from the date of death (or last borrower entering care) for the estate to repay the outstanding loan. The estate continues to accrue interest during this period. Some plans allow up to 12 months; check the individual plan terms; (4) What is owed: the outstanding capital + all rolled-up interest that has accrued since drawdown. Lifetime mortgages do not require monthly interest payments — instead, interest rolls up at the contracted rate and compounds. On a plan taken out 10 years earlier at 4% interest with a £100,000 drawdown, the outstanding balance could be £148,000+ before any additional drawdowns; (5) No-negative-equity guarantee: all Equity Release Council member plans must include a no-negative-equity guarantee — the estate will never owe more than the net sale proceeds of the property, even if the outstanding debt has grown to exceed the property's value; (6) Options for the estate: (a) sell the property and repay the debt from proceeds — the most common outcome; (b) a beneficiary can refinance by taking out their own mortgage on the property and paying off the equity release; (c) a beneficiary can buy out the equity release plan with their own funds.

Yes — an outstanding lifetime mortgage at the date of death is a genuine arm's-length commercial debt secured against the property and is deductible from the estate for inheritance tax purposes under IHTA 1984 s.5: (1) IHT deductibility: the full outstanding balance of the lifetime mortgage (capital + rolled-up interest to date of death) reduces the gross estate value before the 40% IHT rate is applied. If the property is worth £600,000 and the lifetime mortgage outstanding is £200,000, the net property value for IHT is £400,000; (2) How it affects the net estate: property value − lifetime mortgage balance = net estate contribution from the property. Funeral expenses and other debts are also deductible, further reducing the IHT exposure; (3) RNRB and the downsizing addition: the Residence Nil-Rate Band (£175,000 in 2026/27) can still be available for the net value of the property after the lifetime mortgage deduction, provided the property is closely inherited by a lineal descendant. If the net property value is less than £175,000 (because the lifetime mortgage has eroded it), the RNRB is capped at the net value. If the property has been sold to fund care before death, the IHTA 1984 s.8FA downsizing addition may still allow the full RNRB to be claimed against other qualifying assets if the property was sold on or after 08 July 2015; (4) Interaction with nil-rate band: the deductible equity release debt reduces the taxable estate, potentially keeping it under the NRB (£325,000) + RNRB (£175,000) threshold. For some estates, the lifetime mortgage is the reason there is no IHT liability at all.

Yes — the estate is not required to sell the property to repay the lifetime mortgage. There are several alternatives, though all require sufficient funds: (1) Beneficiary refinancing: a beneficiary who wants to keep the property can take out their own residential mortgage (or buy-to-let mortgage if it will be rented) and use the proceeds to repay the equity release in full. The property is then transferred to the beneficiary by assent. Most mainstream lenders will lend against a property held in an estate pending probate — the timeline must align with the lender's offer period; (2) Cash repayment: if the beneficiaries have sufficient liquid assets, they can pay off the equity release from their own funds and have the property assented to them at probate value. No CGT is triggered at the time of assent; (3) Downsizing protection: some equity release plans include a 'downsizing protection' feature — if the borrower's circumstances change and they want to move to a smaller property, they can repay the equity release without early repayment charges provided they meet the qualifying conditions. This feature may not apply on death (check plan terms); (4) Early repayment charges (ERC): some plans have ERCs during a fixed-rate incentive period (typically 5–10 years). On death, many plans waive the ERC after the first 3 years or immediately on death. Check the specific plan terms — the statement of key features issued when the plan was taken out will specify the ERC structure; (5) Timeline pressure: the 12-month repayment window creates practical pressure on the estate. If probate is delayed or a property sale falls through, contact the provider early to discuss an extension. Providers are generally flexible where the delay is not caused by the estate; (6) Inherited Aviva/Legal & General plans: the major providers have specific processes for inherited properties — ask the bereavement team what flexibility exists before committing to a sale.

For a joint lifetime mortgage, the death of the first borrower does not trigger repayment: (1) The plan continues: the surviving borrower retains the right to continue living in the property under the same terms. The outstanding balance continues to roll up at the same contracted interest rate; (2) Notification is still required: the executor of the first estate (which may be the surviving spouse) should notify the provider of the death promptly. The provider will update their records and confirm the plan continues on the same terms; (3) Repayment triggers on second death: when the last surviving borrower dies or moves permanently into long-term care, the standard 12-month repayment window begins; (4) Interest continues: during the period after the first death and before the plan is repaid (potentially years), interest continues to compound. The longer the surviving borrower lives, the larger the outstanding balance will be at repayment; (5) Moving to care: if the surviving borrower moves permanently into long-term care, this also triggers repayment. Most plans allow a grace period for the surviving borrower to arrange the sale or repayment; (6) Estate planning consideration: the first death does not reduce the outstanding debt (the debt does not split in half — the full amount remains due on second death). This is important for IHT planning: the deductible debt grows larger the longer the surviving borrower lives; (7) Beneficiaries should be told: ideally the plan terms should be shared with the executors and main beneficiaries before the first death, so there are no surprises when the second death occurs.

Home reversion plans — where the homeowner sells a percentage of their property to a reversion company in exchange for a tax-free lump sum or regular income while retaining a lifetime lease — work differently from lifetime mortgages on death: (1) How home reversion works: the homeowner sells 25%, 50%, or 100% of the property to the reversion company (the 'provider') at a discount to market value (often 30–60% below market) in exchange for tax-free cash and a rent-free lifetime lease. The homeowner remains in the property as tenant for life at a nominal rent (typically £1/year); (2) On death: the reversion company's share of the property is realised on sale. If the homeowner sold 50% and the property sells for £500,000, the company receives £250,000 regardless of the property's current value (up or down from when the plan was taken). The estate receives only the homeowner's remaining share (50% = £250,000 in this example); (3) IHT: the homeowner's estate only includes their retained share of the property (the percentage not sold). The sold percentage is already outside the estate. For a 100% reversion, the property is entirely outside the estate — no property value in the IHT calculation; (4) No debt: unlike a lifetime mortgage, there is no outstanding debt to repay. The property has already been partly sold. There is no 12-month repayment window; (5) Market decline risk: with a lifetime mortgage, a no-negative-equity guarantee protects the estate. With home reversion, the estate's retained share falls in value if the property falls in value — there is no equivalent protection. The reversion company also benefits if the property value rises; (6) Popularity: home reversion plans are now much less common than lifetime mortgages — most equity release sold today is in the form of lifetime mortgages.