Switching Equity Release Plans

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 said here’s all you need to know about switching equity release plans.

Switching Equity Release Mortgages Effectively

With dropping equity release interest rates and a more vast selection of lifetime mortgage schemes accessible today, most people are wondering if they can switch their equity release plan for a more convenient one.

Well, thanks to the Equity Release Council³ and Financial Conduct Authority⁴, you can switch to a better plan. However, it’s not that straightforward switching to a new lender or even a new equity release mortgage.  For the switchover 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, however, that wasn’t the case a few years back.  

As 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. Such a high penalty can make the switchover entirely unviable, even if the interest rates are significantly lower.

What Other Factors Do You Need to Consider?

Well, just 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

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

*Top Tip’ – Some equity release companies won’t charge you an application fee which helps in cutting down the set up costs. So, it’s imperative to compare equity release quotes first to get the best equity release deal

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.

The main factor you need to consider, however, is the interest rates. In general, interest rates are lower in the current market climate than a few years back. It’s because, with the increasing popularity of the equity release schemes, mortgage products are becoming more competitive hence the reduce interest rates.

Therefore, 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.

Who Can You Turn To?

Well, the best person to consult, as per the ERC’s standards is an equity release financial advisor.  The financial advisor has expertise in equity release plans and can offer you objective and valuable advice on alternative mortgage providers and loans.

The advisor charges a flat rate for their services which is 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, cashbacks or even no application fee with some plan providers.

Can One Borrow More Capital?

Yes, you can. 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. You can also borrow more capital, especially with mortgage deals like health and lifestyle factors.

Moreover, to figure out how much you can release with an equity release mortgage, you can efficiently use the equity release calculator, which is usually free. To do this, you’ll have to input:

• Your postcode – you should have an estate in the UK
• The age of the youngest homeowner – 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

Therefore, don’t be stuck with an old mortgage plan or high-interest rates. Hurry and get to your financial advisor and see whether you can switch to a more reliable equity release product. It might be the difference between you saving some inheritance to your family and being completely broke trying to pay for the high-interest rates and set up costs. So, be wise!

Use the Lifetime Mortgage Calculator

Make sure you read this article Best Equity Release Company and is equity release a good idea?

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.

Common Questions

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