An equity release mortgage is a form of home loan that allows people over the age of 55 to borrow against the value of their property. This money is a fantastic way of financing your dream retirement while still living in your beloved home.
If you currently have a long-standing equity release mortgage, then this article is for you! We will discuss why you need to review your plan regularly and how taking a closer look at the current interest rates can save you money.
Why Should You Review Your Plan?
Many people don’t realise that equity release mortgages come with a fixed interest rate. As time goes on, your monthly mortgage repayments will increase due to compound interest, and so there may be an opportunity to get better rates by refinancing1 or transferring the loan.
One of the most significant advantages of reviewing existing plans is if you still have some leftover equity from when you took out your original plan. If this is the case, then it’s worth checking whether these funds can be used with new, lower rates because they are tax-free!
Reviewing your current situation could save money in interest charges, and allow you to take advantage of any unused monies that would otherwise sit idle in cash investments, essentially allowing them access to more tax-free capital.
What Has Changed Since You Took Out Your Original Plan?
The amount that you can release from your home is determined by:
- Your age
- The age of your spouse if you have a joint plan
- The condition of your home
- The condition of your health
Older and sicklier homeowners can generally borrow more and get a better deal. If any of these circumstances have changed for you, it’s worth looking into updating your plan.
How Low Have Equity Release Interest Rates Fallen?
Today, the rates on equity release plans are much lower than they were when you took out your original plan. This is primarily due to several factors, including inflation and changes in interest rates.
A few years ago, many people looked at the potential for an equity release mortgage as a retirement tool used sparingly. This is because there are costs involved in equity release.
With the emergence of better mortgage options, the Equity Release Council, and a changing job market, interest rates on equity release mortgages have fallen enough so to make it one of the best retirement financial plans on the market.
When you compare them with other forms such as annuity plans or pensions, there are some distinct advantages to taking out an equity-release plan instead!
What Other Factors Should be Considered Other than the Interest Rates?
When considering switching your equity release plan, you should look at all the benefits involved.
Firstly, be sure that your plan provider is a member of the Equity Release Council. If not, we suggest you switch!
Next, you must have a look at any deals available, all terms and conditions, and what the early repayment charges are, over and above how much equity the company will allow you to release.
Speak to your financial adviser to find the best plan for you.
What Action Should I Take Now?
If you want to make sure that your equity release plan is still the best option for retirement, you must contact a financial adviser who can offer advice, and review any changes in circumstances since when you first took out the loan.
This might mean refinancing if rates have gone down or asking about whether paying off an early repayment penalty would be worthwhile, something which will depend on how long it has been since the original agreement was made!
As always, talk over these options with family members before making any final decisions, as this could help ensure that everyone agrees about what should happen next.
That way, there won’t be any unpleasant surprises later after everything has been agreed upon and things have moved forward – especially once you’re retired at last!
When Should I Review My Existing Equity Release Mortgage?
There is no set time limit for when people should review their equity release plan, which means that it depends on what you want to use the money saved for.
If it’s something like a holiday or a new car, then this might be more appropriate right now, but if you’re already retired and looking at how much of your pension fund will last until you die, then waiting another few years would make sense!
How Will Reviewing My Mortgage Affect Monthly Payments?
Reviewing your equity release mortgage might mean that you need to make higher payments each month, but it will also allow for a larger lump sum in the future, which could be worth it depending on what is being used towards.
Do I Need a Solicitor to Review My Existing Equity Release Mortgage?
It’s not necessary to have a solicitor review your equity release plan – it’s more about finding out what is best for you and your family.
What Happens If I Find Out That the Mortgage Has Been Refinanced Without My Knowledge?
If you find out that the mortgage has been refinanced without your knowledge, then it’s worth contacting your lender as soon as possible to make sure they don’t take back any money from you.
With home equity rates at an all-time low, it is definitely worth reviewing your existing mortgage. A fixed interest rate can provide some peace of mind for homeowners and investors alike in these uncertain economic times.
As the cost to borrow money increases exponentially with each passing day, now is not the time to take on more risk than necessary to maintain control over one’s assets.
Use our free equity release calculator to see how much cash is tied up into your home!