If you’re thinking about investing in an equity release scheme, then there are many things that you will need to consider. One of the most important considerations is whether or not it’s possible to remortgage your current equity release scheme.
Luckily for you, we’ve carefully unpacked this topic in this article, discussing exactly what this means and how it could affect your investment decision.
Continue reading to find out more!
Why Consider an Equity Release Remortgage?
A remortgage is a way for you to switch to a new equity release plan.
The reasons to do so would include:
- For your current plan, you might be paying a much higher interest rate than what is available today. To date, equity release interest rates are at an all time low! If your current interest rate is sitting at 6 or 7%, these days, the average rate is 4%, with some being able to borrow at a mere 2.7%. If your health has deteriorated since you took out your original plan, you might find that you can access much lower rates now.
- There are newer and better plans on the market. The equity release industry is constantly growing! For example, over 5 years ago, there was no such thing as a ‘drawdown lifetime mortgage.’
- With the market expanding, some top equity release providers offer amazing deals that you should look out for.
It might be worth considering how much money would be available if something unexpected happened before embarking on this course of action, so speak to an expert adviser for more information about what this would look like in practice.
Which Are the Best Equity Release Schemes to Switch To?
The best equity release schemes to switch to will depend on your specific needs and financial situation.
You must take into account the amount of interest payable, as well as service charges1, before deciding to change providers.
If you are considering remortgaging with another provider, it would be worth checking out their rates for fixed-rate loans and variable-rate mortgages2 to get an idea of what could suit your circumstances best.
There may also be other costs associated with this course of action, such as legal fees and valuation3 costs, which need consideration when weighing up all available options, so speak to a specialist advisor if you’re unsure or unhappy with any aspect of the new mortgage agreement.
A better option might be to remortgage with the same provider.
This may be a viable option if you are more than 20 years away from retirement and require an equity release scheme of less than 50% of your property’s value for funds.
It’s also worth checking whether or not any other benefits would arise by doing so, such as cheaper interest rates on future loans taken out with the mortgage company.
Bear in mind, too, that if you have bought into a shared ownership home at some point during your lifetime, then this might mean it would be difficult to remortgage elsewhere without forfeiting any share that has been purchased using money obtained via previous non-shared equity releases schemes.
Does My Current Equity Release Scheme Allow Me to Remortgage?
If your mortgage has an equity release scheme of less than 50% of your property’s value, then you will not be able to remortgage. If it’s more significant than this amount, and the lender agrees you will be able to.
In that case, you may obtain a different type of loan. Such as where one have underestimated their income or assets to receive financial assistance below what would usually be available.
Remortgaging after an early cash release from a previous non-shared equity release product can make sense for some people because they will no longer need any other form of finance (including the equity release) until their death. At this point, all debt is canceled in a non-shared equity release.
A remortgage may be possible if you have already released some of your property’s value and there is enough left to cover the repayments on a new mortgage loan. If not, it would involve taking out an expensive secured personal loan4 to pay off all existing mortgages, including any money borrowed from an equity release provider.
In addition, and most importantly, you might need to cover an ‘early repayment charge’ if you remortgage your equity release plan. This can cost you as much as 25% of the initial loan. You can ask your financial adviser about the details of your plan. It still might be a worthwhile calculation, if the new plan is highly beneficial.
Remortgage up to 75% Of the Value of the Property
There’s a limit to how much equity you can release from your home. This will depend on what type of mortgage product you have and the length of time that has passed since it was taken out.
Some mortgages allow a remortgage of up to 75% of the property’s value, so if there are any remaining funds, this could still be done, but would need to wait until more money had been released from the scheme to do so.
Bear in mind that when applying for future loans or mortgages, lenders may require evidence relating as far as 40 years ago, which means it’s essential to check with them before starting such an application process. Don’t rush into anything without giving yourself enough time to discuss it with the lender.
How Do I Go About Remortgaging?
Remortgaging your property is a way to release equity from its value to use for another purpose.
To remortgage, you will need to have a qualified financial adviser who can give you advice on what type of home loan would be best suited for your needs. In addition, they help with finding lenders and organising everything for you.
The whole process may take some time before they reach any agreements, but once this has been achieved, all that’s left is choosing how much money you want to borrow, based on what is available to you.
Once this has been decided, go ahead and get yourself a solicitor so they can prepare legal documents for you to sign.
What Is the Best Way of Getting an Estimate for a Remortgage on Your Current Equity Release Scheme?
The best way to get an estimate for a remortgage on your current equity release scheme is by contacting the company that has given you this release.
They should give you all of the information that you need and help answer any questions that you might have. Alternatively, many free companies online will offer advice about equity releases, including how much they cost, etc.
Do We Need a Solicitor for the Remortgage Process?
A solicitor is not required for remortgaging a property, and you do not need to have any experience with this process. However, it can be beneficial if the company that has given you your Equity Release Scheme requires one (this will be mentioned in their terms).
How Do I Know if I Qualify for Remortgaging My Current Equity Release Scheme?
The first step is to find out if your Equity Release Scheme has a remortgage option. If it does, then you will need to check whether the company that currently holds your loan allows this kind of move or not – which should be stated in their terms and conditions on their website.
What Requirements Are There if I Want to Remortgage My Current Equity Release Scheme?
If you would like to remortgage your current Equity Release Scheme, then the requirements are as follows:
- You must be over 55 years old.
- Your equity release scheme has been set up for a minimum of five years and is not yet due for repayment (i.e., it should still have at least ten more years left).
- The company currently holding your loan agrees to let you do this kind of move with them.
Whether you want to remortgage your current equity release scheme or consider one for the first time, we’ve got all of the information you need. We have the tools to teach you how equity release works.
Equity release can be an excellent way to increase your retirement funds without worrying about cutting back on other expenses in life.
Still, there are benefits and disadvantages, so make sure that this is worth looking into before making any decisions.