Equity release schemes have now been in existence for over 15 years in their current format. Here we answer some common questions such as – ‘Can I get a better interest rate?’ & ‘Can I borrow additional funds? ’.
Equity release schemes allow you to free up some or all of the equity tied up in your property and use the tax free cash for lifestyle reasons. This can be a particularly useful option for those who do not have enough cash flow and own a property, but do not wish to sell it.
If you already have an equity release scheme but for some reason you’re thinking, ‘should I remortgage my equity release?’ it may be worth your while to compare equity release rates & deals to find a more suitable product.
The equity release market is constantly changing, with interest rates rising and falling, and new innovative equity release schemes becoming available all the time. For instance, interest rates at the moment are much lower than they were just a few years back. So if you decide to remortgage your equity release just now, the fall in interest rates could result in significant savings for you over the long term, even when you take into account the setting up costs, which include solicitors fees, application fees etc. Not only that but you may have released all the money from your original plan & now find you require a ‘top-up’ to continue enjoying your retirement.
Why should I review my existing equity release plan?
With equity release schemes becoming increasingly popular, equity release providers are developing new products and schemes all the time. Something that was not an option a few years ago may now have become entirely possible. Therefore, a more suitable and pragmatic product may now be available. This means that by reviewing your existing equity release UK plan and shopping around for new options is a good idea, especially at this point in time.
What should I look out for?
Equity release schemes are defined as a lifetime mortgage. As such all plans have some form of in-build early repayment charge which is differentiated by the company offering the equity release plan. These penalties can exist for a set number of years on a fixed basis, or alternatively they can be linked to an investment such as government gilts or Bank of England base rate.
Particularly government gilts seem to be a favourable barometer used in today’s equity release marketplace. The two largest lifetime mortgage companies – AVIVA & Just Retirement have decided to use them, so you need to be aware of potential back end penalties if the equity release mortgage is paid off early. Other potential suitors such as LV= (Liverpool Victoria) & New Life Mortgages will only charge a fixed percentage penalty over either 5 or 10 years, with no penalty thereafter.
What is the next step?
If you are considering remortgaging your existing equity release scheme you must seek the professional services of an equity release adviser who has the experience of remortgage work. The adviser should be independent, so as to have the whole range of equity release schemes at their disposal. This is important as to remortgage again will incur a new round of equity release set up costs which need to be minimised as much as possible to ensure the new equity release deal is viable.
Before you decide to proceed with an equity release remortgage, it is important to consider several factors.
Remortgaging an existing equity release plan is not just a matter of switching to a new policy.
The following areas all need to be assessed & equity release comparisons made: -
- Current value of the property – this may have changed since the original valuation, particularly in light of recent market conditions
- Age of the youngest applicant – since the original equity release plan was taken out, you will be older, thus the loan-to-value ratio’s will have increased also meaning you can borrow a higher percentage of the house value
- Balance of the existing equity release scheme – this can be based on your last annual statement or by requesting a redemption statement from your lender
- Whether any early repayment charges would apply? – this can be ascertained from the redemption statement that should be ordered from your existing lifetime mortgage provider. This figure can be the difference between staying & switching plans dependent & the size & duration thereof.
Upon collating this data your equity release adviser can make an informed decision as to whether to stay put, or it’s in your best interests to switch plans. This is where the adviser’s independence becomes important. With any new equity release application comes a new set of set up costs. However, if your adviser can obtain a free valuation, cashback or any other incentive current available, then this will mitigate some of the new charges & make the whole process more worthwhile.
Professional financial advisers from Equity Release Supermarket will have all these tools at their disposal. With years of practical experience & many advisers having worked at the likes of AVIVA & Prudential, we know how these plans can be remortgaged & transacted quickly & cost effectively. With our current crop of best equity release deals we ever had, now is definitely a good time as any to consider saving yourselves, & your beneficiaries £1000’s by switching your existing equity release plan.
For a FREE no obligation equity release remortgage analysis, please contact the Equity Release Supermarket team on 0800 678 5159.
Alternatively, please complete the ‘find an adviser’ contact form to book an appointment with your local equity release adviser.
Equity Release Supermarket is one of the leading independent, over 55’s equity release specialists who have won awards for quality & impartial advice.
They can be contacted at [email protected] where your enquiry will be treated with strictest confidence.