You can indeed have the best of both worlds when it comes to equity release, with no early repayment charges!

With many UK homeowners over 55 releasing equity from their home, the question is, do all those individuals consider that life is not always predictable?

Equity release is intended to last for life, but we all know that circumstances can change.

Perhaps you urgently need to sell your home or move overseas to be close to family.

If not careful, you may find settling your equity release plan in full proves to be very expensive.

Are you wondering how we discovered these secrets?

Well, after researching equity release plans from different providers and comparing early repayment charges, we have the inside scoop.

Could you cancel your equity release plan with no stress, no fuss?

Therefore...

What are Early Repayment Charges?

Early repayment charges are a penalty you pay for cancelling your equity release plan before it comes to an end.

These charges will vary, depending on the amount indicated by your plan provider.

PRO TIP: Always inquire about your plan’s early repayment charges before taking out an equity release plan.

5 Reasons Why You Might Cancel Your Equity Release Plan

While equity release is intended for life, you never know how your plans may change.

Here are 5 reasons why you could find yourself cancelling your equity release plan:

• Unforeseen immigration.¹
• Urgently needing funds from the sale of your home.
• The desire to move to a house that does not qualify for equity release.
• The desire to move into an informal structure, like a boat or caravan.
• Wanting or needing to move in with friends and family.

Whatever the case, you must make an informed decision before taking any drastic steps.

Speak to your trusted financial advisor or broker to guide you through the equity release process and the equity release costs.

Downsizing Protection and Equity Release

Some lenders offer downsizing protection, and it is a great special feature to look out for when selecting an equity plan.

It allows you to move into a smaller home after five years and repay your outstanding mortgage debt² early, without incurring any penalties.

An example:

If you sell your home for £500,000, with an existing lifetime mortgage debt of £200,000*, you can clear your debt and buy your new home with the profit.

All this without paying anything extra.

* This is for indicative purposes only.

Note: Remember to consider the pros and cons. Plans with such features may come with higher interest rates.

Standard Early Repayment Charges

Early repayment charges will generally be determined by guidelines set out by the individual lender.

Some will opt for a percentage of the equity released whilst others a set amount determined by the original equity unlocked.

This percentage can also be on a scale based on how long ago you signed your equity release plan.

For example, you may pay 5% for the first 3 years, 3%* for the next 5, and nothing after that time.

* This is for indicative purposes only.

The lender could use a complex calculation to determine the early repayment charges you may need to pay.

In such cases, seek counsel³ from a finance professional, like your trusted financial advisor or broker.

They could base this calculation on:

• Benchmark interest rates.
• Rates that are linked to an index of government gilts.⁴

Early repayment charges can be steep. In some cases, they are as much as 25% of your initial loan amount. This is for indicative purposes only.

It is always wise to shop around for your equity release plan and find out about these rates.

That way, you can find the best option for you and your family.

You Could Achieve No Early Repayment Charges!

Sounds too good to be true? Fortunately, no!

Most equity release lenders typically offer plans with early repayment charges for the first three years of your equity release.

Others will set a maximum age, and from there, no early repayment charges will apply.

In some cases, you will only need to worry about early repayment charges for the first five years of your plan.

Once this point has been reached, charges will no longer apply.

Common Questions

In Conclusion

While equity release is intended for life, you may be in a situation where you will need to settle your plan early.

Although many plans allow you to make repayments, paying off your plan in full is very different.

It is essential to learn your plan’s early repayment charge structure before signing any agreement.

Knowledge is power, and it is always best to have it in advance.

Discover all the pros and cons of equity release, and speak to your financial advisor or broker before making any final decisions.

Equity release could change your life, but you will want to be fully informed before taking the plunge.

Make sure you find out about your equity release early repayment charges before settling on a plan.