Listen up: If you released equity before 2020, you’re likely paying more interest than necessary!
Equity release interest rates were around 6% just 5 years ago, and boy have things changed! By switching plans, you could save your family a fortune when your property is sold.
By working through this article:
- You’ll learn the 7 steps to switching your equity release mortgage.
- You’ll discover if switching plans is right for you.
- Finally, you’ll have the tools to decide if switching equity release plans is worth the effort.
As experts in the field, we’ve looked at over 220 equity release plans available today and compared them to offerings of the past.
Whether you’re undecided or not, if you’re looking to potentially switch up your equity release plan, you’ll need to know what steps to take. Here they are!
What You MUST Know
Before you do so, we’ve summed up the most important information about equity release in this quick video. Check it out!
Switching Equity Release Mortgages Effectively
With the lowest ever equity release interest rates and a larger selection of lifetime mortgage schemes accessible today, most people wonder if they can switch their equity release plan for a more convenient one. With shifts in the market, it might just be worth the effort.
Thanks to the Equity Release Council and Financial Conduct Authority, you can switch to a better plan if you wish to. It’s your money, 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.
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. 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 equity release company and see 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 interests.
*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 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 SHIP rules, you’ll have to consult a legal adviser 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. Therefore, you’ll benefit from shopping around to 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. 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, vastly assists to reduce interest rates. Better yet, you’ll be saving so much money in the long run!
Who Can You Turn To?
As per the ERC’s standards, the best person to consult is a financial adviser. Find one that has expertise in equity release plans. They’ll offer you objective and valuable equity release advice on the various mortgage providers and loans.
At the end of the day, it’s easier and more time-effective to be assisted by 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 advisers 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 a free valuation, cashback or even no application fee with some plan providers.
Can One Borrow More Capital?
Yes, you can borrow more capital if you need to. Great, isn’t it? Older mortgage plans were inflexible, as there were no drawdown lifetime mortgages. Thus, if you’re looking to borrow some supplementary finances to remortgage your equity release loans, you can find flexible, reliable, cost-effective plans, with better interest-rate deals.
Best of all:
You can also borrow more capital, especially with mortgage deals that focus on health and lifestyle. Equity release has come a far way and has improved so much.
Moreover, to figure out how much you can release with an equity release mortgage, you can efficiently use our How Much Equity Can I Release Calculator. To do this, you’ll have to input:
- Your postcode – you need to own an estate in the UK.
- The youngest homeowner’s age – who needs to be aged 55 and above (the older you are, the more capital you can borrow).
- Your property market value – your residence needs to be valued at more than £70,000.
So, What Are The 7 Steps in 2021?
- Contact your financial adviser.
- Inquire if your current plan gives you the option to switch.
- Learn if your old plan has early repayment charges.
- Consult with a few lenders to find new plan options.
- Discover if making the switch is financially viable or not.
- Go through the process of the paper work, an updated valuation, and anything further required.
- Switch to your new plan and continue to enjoy your life!
Got Questions? Check These First
Can You Switch Your Equity Release Plan?
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 adviser and discover if you can switch your equity release loan.
It could potentially save you thousands.
Can You Save Cash by Switching Your Plan?
Yes, you can. Most older 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.
Switching equity plans is a fairly simple process, 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, asks for too many fees and extra charges, or has high interest rate, then you should switch today.
Consider all your options and all the different providers, including their prices, payments and rates to choose the best one for your future.
Most importantly, if your currently plan provider is not a member of the Equity Release Council, you must switch today!
Are you ready to make the switch? Speak to your financial adviser today!
Plans are regulated by the government’s Financial Conduct Authority, which means advisers and product providers are obliged to adhere to published standards regarding their knowledge and the way they run their businesses.