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Help Switching Equity Release Plans

By Mark Gregory on the 17th March 2018

With the prospect of interest rate rises in the near to mid-term, it's a good idea to make sure you have the best deals and rates for all your financial commitments. If you have an equity release plan, this is also worth reviewing for a more reasons than just a potential interest rate rise alone.

If you previously took out a lifetime mortgage, there are newer products on the market today that could offer lower interest rates and greater flexibility than the plan you are already on. Current equity release plans carry features such as inheritance protection, the flexibility to allow voluntary repayments, and fixed charges for early repayment, which can help keep the costs down for you and your family in the long term.

Due to the complex nature of equity release plans, deciding whether to switch them is not straightforward. Fortunately, online calculators are available to give an idea as to whether opting to switch plans is the right choice for you. Calculations should take into account early repayment charges, the cost of setting up a new plan and the time taken to completion when making the comparison, but shouldn't form the basis of your decision.

A financial advisor can further analyse your existing setup, determine whether switching is worthwhile, and help you search for alternatives. This is where an equity release comparison service helps as this us where your old plan can be directly compared to a brand new scheme. By taking your existing balance and possible early repayment charge, your equity release adviser can search the whole of the market for a more suitable alternative.

Based on rates alone, a direct equity release comparison can be made by analysing the old plan & projecting its balance forward, then costing a new plan alongside, but this must include all set up costs including valuation and application fees (if charged), advice fee and solicitors fees. Your equity release adviser, should then be able to establish the break even point as to when the new plan will be more cost effective than the old. Taking this in conjunction with the age of the applicants will formulate the decision as to whether it would be worthwhile switching equity release plans, or not.

Many of us have remortgaged before, well switching or swapping an existing equity release plan for another is therefore nothing new. The principle of the transaction is the same; trying to save on monthly costs over the duration of the contract.

If you are intending to switch plans, make sure that your financial advisor has access to the whole of the lifetime mortgage and home reversion market, and that they are not tied to selling products from just one lender.

Most importantly, make sure that the company you are using is registered with the Financial Conduct Authority and that the advisor you are dealing with is a member of the Equity Release Council. This ensures that they follow a strict conduct code, and should anything go wrong, the financial ombudsman will be there to assist. You can check both by searching the FCA and Equity Release Council's website.


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