The equity release1 market is evolving, and with more and more people opting for these tax-free cash gifting mortgages, you can now get better and more competitive rates.
So, if you’re stuck with your old and high-interest rate2 equity release plan, it’s time you think about switching to a more flexible and reliable option. That being said, here’s all you need to know about changing equity release plans.
Are You Considering Equity Release?
Switching Equity Release Mortgages Effectively
With dropping equity release interest rates and a more vast selection of lifetime mortgage schemes accessible today, most people wonder if they can switch their equity release plan for a more convenient one.
If this is you, then read on!
Well, thanks to the Equity Release Council3 and Financial Conduct Authority4, you can switch to a better plan. You don’t need to be stuck with something you’re not happy with. It’s your money, it’s your choice, and no one can stop you from making the best decision for your future. And, lucky for you, there are so many to choose from, so you’ll definitely find one that suits you perfectly.
But let me tell you something…
It’s not that straightforward switching to a new lender or even a new equity release mortgage. For the switch-over to be viable, it’s crucial to consider several factors, including the early repayment charge clause. An early repayment charge (ERC) is typically a penalty that applies to specific equity release plans. While most mortgage providers are looking more carefully into the early repayment charge, they didn’t do so a few years back.
As the years went by, the actual charge varied from one loan policy to another and most equity release schemes range from a fixed percentage charge of 5% of the sum repaid, up to as high as 100% of the total amount borrowed.
As if that’s not enough.
You’ll need to have a thorough look into every provider you choose and what they charge for everything. Such a high penalty can make the switch-over entirely unviable, even if the interest rates are significantly lower. That’s not something you want to happen.
What Other Factors Do You Need to Consider?
Well, like the early repayment charges, you also need to take into account elements like the:
The Valuation Fee – These costs are usually paid upfront on your application and are dependent on the state market value. The higher the property valuation, the more costly the valuation fees. Therefore, you must look for equity release companies that offer a free valuation since there won’t be upfront fees.
The Application Fee – The plan provider typically deducts the fee from the lifetime mortgage proceeds upon completion. Some equity release firms will include this. However, it might eventually attract compound interests5.
*Pro Tip – Some equity release companies won’t charge you an application fee, which helps cut down the set up costs. So, it’s imperative to compare equity release quotes first to get the best equity release deal. You don’t want to kick yourself later when you realise that there’s a better provider with fewer costs involved. You want to make sure you get the best price with the least extra fees and payments.
The Solicitor’s Fees – As part of SHIP6 rules, you’ll have to consult a legal advisor who’s separate from the mortgage provider. The solicitor will help you understand all the legal requirements of the equity release mortgage. It’s important to remember that solicitor’s fees are unavoidable, so you’ll benefit from shopping around so that you can find an excellent deal. Find one you can trust and with whom you feel most comfortable.
The main factor you need to consider, however, is the interest rates. Yes, interest rates are so important and crucial to look into. In general, interest rates are lower in the current market climate than a few years back. With the increasing popularity of the equity release schemes, mortgage products are becoming more competitive. This, in turn, helps a lot to reduce interest rates. Better yet, you’ll be saving so much money in the long run!
Think about it:
If you took out an old equity release plan a few years back, you might find yourself locked into conventional interest rates, but by switching to a better mortgage scheme, you might find the best lifetime mortgage deal. So you need to have a look at these interest rates and maybe you’ll discover a better provider with better interest rates, and you can switch to change your future for the better.
Who Can You Turn To?
As per the ERC’s standards, the best person to consult is an equity release financial advisor. The financial advisor has expertise in equity release plans and can offer you objective and valuable equity release advice on alternative mortgage providers and loans.
But wait, let me tell you something.
Because you don’t know all the ins and outs about equity release, and you might not have the time to do the research yourself, it’s so much easier and time-efficient to ask someone who knows all about equity release plans.
The advisor charges a flat rate for their services, taken into account when calculating the setup expenses for a new equity release mortgage. The best equity release advisors are independent since they have access to the whole equity release market.
They conduct research and help you find the best equity release remortgage deals, which can include incentives like the free valuation, cashback or even no application fee with some plan providers. This is their only job, and they’re there to help you, you can trust these experts wholeheartedly.
Can One Borrow More Capital?
Yes, you can borrow more capital if you need to. Great, isn’t it? Older mortgage plans featured inflexibility. There were no drawdown lifetime mortgages. Thus, the homeowners looking to borrow some supplementary finances to remortgage equity release loans can now find flexible, reliable, cost-effective as well as better interest-rate equity release deals.
Best of all:
You can also borrow more capital, especially with mortgage deals like health and lifestyle factors. Equity release has come a far way and improved so much.
Moreover, to figure out how much you can release with an equity release mortgage, you can efficiently use the equity release calculator, which is thankfully usually free. To do this, you’ll have to input:
- Your postcode – you should have an estate in the UK.
- The youngest homeowner’s age – one needs to be aged 55 and above (the older you are, the more capital you can borrow).
- Your property market value – your residence should be valued at more than £70,000.
Yes, you can. If you have an existing mortgage that might be subjecting you to high-interest rates and few benefits, then you might want to consult your financial advisor and find out if you can switch your equity release loan. It could potentially save you thousands.
Yes, you can. Most traditional equity release schemes subject you to high-interest rates and feature few benefits. However, by switching to better lifetime mortgages like the voluntary repayment option, the retirement interest-only mortgage or the interest-only mortgage, you can pay up your interests early and save thousands while at it.
Moreover, it’ll help you level your balance and help you save up some capital for inheritance.
It’s because the equity release market is rapidly growing, and thus, there are more competitive rates today than a few years back. If you already have a plan, you might notice that your current rate might not be as competitive that the mortgage plans being offered right now.
That means that you might benefit more from swapping to a more competitive equity release product.
Equity release is a mortgage plan that allows you to unlock the value tied up in your property. You repay the mortgage loan when you die or move into residential care. Various equity release mortgages come with multiple features that you may or might not want to take advantage of.
There are features like the inheritance protection or downsizing protection that might not be a feature in your current loan policy. Well, if that’s the case, then you might be able to switch your equity release mortgage for another that offers you these additional benefits.
Switching equity plans is so simple, and it can help you save money in the long run! If you’ve been stuck with an equity release provider that you’re unhappy with or that ask too many fees and extra charges, or a high interest rate, you can switch today. Consider all your options and all the different providers with their prices, payments and rates to choose the best one for your future.
Use the Lifetime Mortgage Calculator
Plans are regulated by the government’s Financial Conduct Authority, which means advisers and product providers are obliged to adhere to published standards in terms of their knowledge and the way they run their businesses.
How Much Can You Release?
Use the FREE Calculator Below