The equity release market has seen significant changes and improvements over the last decade. This has seen new lenders come to the market such as Legal & General, Canada Life and Scottish Widows with 100’s of new products that have features that previously didn’t exist.
These introductions have all been for the benefit of the consumer by providing extra options such as flexible voluntary payments to help control the future balance and maximum loan-to-values currently up to 58% at age 83 for someone looking for the highest release possible.
Furthermore, there are many new features that can assist like downsizing protection – which means you can repay your loan should you move property after a fixed number of year. You can now ensure you leave an inheritance to your beneficiaries with a lifetime mortgage by choosing to use the protected equity guarantee & selecting how much of the final value of your house you wish to leave to your loved ones.
Finally, for joint applicants we now have a 3-year compassionate windows with companies like Aviva Equity Release have all helped move the market towards the mainstream and become more “consumer friendly”. Indeed, Equity Release Lifetime Mortgage Schemes can now, to all intents and purposes, be treated in the same way that a residential capital and repayment mortgage is – and without the need for any proof of income from the lender.
As such, equity release has evolved exponentially to what it used to be and for all the above reasons coupled with record low interest rates, means it might be an opportune moment to review your existing equity release plan. As we can see above, newer plans have much better features than of old. Lenders unfortunately won’t retrospectively add these features to old plans, which is unfortunate, so we need to consider the options available to us.
There could be a number of reasons to change your existing equity release plan -
1. It may be due to cost of the interest being charged and the benefit that changing to a lower rate of interest would have on your beneficiaries. Going back to 2008, the lowest rate available across the market at that point was 6.29% - that figure today is now around 2.5%. This is a significant difference, and one many existing equity release plan holders are unaware of. The old premise that equity release was one transaction has changed.
Regardless of whether you have an early repayment charge to exit your existing scheme or not, it is always worth exploring this option. The reason for this us that not only can I tell you what the lowest rate available to you is based on your circumstances without cost or obligation, but I can also show you how long it would take to get to a break-even point even if there are costs to be incurred. That way, you can decide yourself if you feel it is cost effective to switch to another scheme or not.
Different schemes have different early repayment charge structures and some older legacy plans with Hodge Lifetime, New Life Mortgage, Mortgage Express, LV= and Scottish Widows had fixed early repayment charges which may have expired entirely and as such, simply not knowing what is available could be costly to you and your estate.
2. Another reason to change could be a requirement for further funding. One of the common misconceptions about equity release is that once you have taken an initial lump sum, that you can’t do it again and that it’s a once in a lifetime exercise. This may be true in some circumstances, but far from it in many others. For example, if you wanted further funding, there are actually 2 options open to you.
One is a further advance from your existing lender. Most lenders would look at your situation and advise that, based on your current property valuation and age, if there is any further funding available. This process is quick and easy and again can be established without any cost or obligation. The application process is also very quick as generally there is no requirement for a solicitor to act on your behalf.
The second route for further funding is via a re-mortgage to a different lifetime mortgage lender. Where any additional borrowing enquiry is made, as a matter of course, we would check not only any potential offering from your existing lender, but we would establish if it was worthwhile to stay with them or to move to a different lender. That again would involve the same process of establishing the cost to get there versus the benefit of increased funding available to you. Once set up, the new scheme pays off your existing scheme, and the surplus funds are forwarded to you for you to enjoy as you wish – sometimes at the same time as benefitting from a lower rate of interest. As such, it can be very much a win-win, and this is not uncommon.
We here at Equity Release Supermarket are truly independent, have no affiliation to any lender and have access to every product on the market. As such, if you would like me to review your existing plan for you for any reason on a no-obligation basis, please feel free to call me on 01925 377331 or email me direct on [email protected] and I will be happy to assist.
I look forward to hearing from you.
Gareth Humphreys – CeMAP CeRER DiPFA
Independent Equity Release Adviser