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John Lawson
John Lawson
Last Updated: 25 Sep 2020
(Rated from 376 reviews)

Have you been paying heft interest rates on your current equity release1 mortgage? Are you thinking about switching equity release plans but don’t know how to go by it?

Well, you’re not alone. If you took out equity release schemes a few years back, then you probably want to switch it up for some of the latest equity release products since they offer you several incentives like free valuations, cashbacks2 or no application fees.

So, for those who might be in the dark, why is it vital to change your lifetime mortgage plan and how much will you get after switching them out?

Well, lucky for you, the voluntary repayment lifetime mortgage can help you do this. The mortgage scheme is a relatively recent innovation in the equity release market, and it can offer you flexibility in how you manage your equity release scheme’s balance in the future. It’s because they enable you to repay up to 15% of your original balance every year – whenever you want to and have the finances available to do so.

If you can make some form of monthly, annual or ad-hoc repayment2, then the effect on the ultimate amount that you’ll have to repay when your equity release plan ends will be significant.

So, how can you figure out the amount of cash you can save up with the voluntary repayment plan? Well, you can do so by using the voluntary repayment calculator and here’s a detailed guide on it.

What You Should Consider Before Switching Your Equity Release Plan

Well, like any other financial product, there are several costs associated with switching an equity release plan, and so you need to weigh your option before taking the next step.

The first factor you need to look into is the early repayment charges3 (ERCs). Older mortgage schemes have significant ERCs as they weren’t designed to be repaid early. Your financial expert will look through these as they could mean that it’s not in your best interest to change your loan plans now.

You also need to consider the costs involved. Setting up a new equity release scheme will incur potential expenses. The associated costs will vary based on the loan you want to switch to, but as per various equity release experts, they could cost you up to £2,000.

Lastly, you need to consider interest rates. If you do switch your lifetime mortgage, you’ll continue to incur daily interest your current mortgage while your application is in progress. Your financial consultant can help factor in a further 60 days interest when calculating the precise amount needed on the application.

Our Most Commonly Asked Questions

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