In my last article on this subject in February 2013 I drew attention to the ease with which borrowers could escape the higher equity release interest rates charged by Papilio UK, the successor to Northern Rock. I also reminded Papilio equity release borrowers that the option to take further loans from Papilio UK, an option Northern Rock originally considered, was no longer available.
Since my original Papilio article, Equity Release Supermarket have been inundated with enquiries leading to many satisfied clients switching to cheaper lifetime mortgages. And with many lifetime mortgage lenders currently offering free valuations and cashbacks, the costs of such transfers rarely exceed £1,500 - a sum that could soon be recovered through cheaper borrowing or funded by increasing the new mortgage.
Indeed, with fixed interest rates as low as 5.63% (5.83% representative APR) we have achieved savings for our clients of over 1.3% on their loans. With such low equity release interest rates, now is an excellent time to consider a remortgage from Papilio UK to a new provider.
Reasons to switch equity release plans
This could be for one of two reasons;
To borrow additional funds & consolidate all old & new borrowings under one roof with a much lower interest rate.
To simply swap equity release schemes on a like-for-like basis, but obtaining a much lower interest rate for the long term.
As an example in real terms, assuming that you remortgage a lifetime mortgage of £50,000 onto a fixed rate of 5.68% from a Papilio UK equity release mortgages rate of 6.99%, then after just 10 years the saving in interest charges would be in excess of £15,000. This would be not only beneficial for you if you require further borrow in the future, but also your beneficiaries who would now receive a larger inheritance.
Obviously, the larger the loan is, the greater the potential savings. This in turn would make large savings for your ultimate beneficiaries. Think of switching equity release schemes like any residential remortgage; you want to obtain the best rate for your outstanding debt, so as not to pay any more interest than necessary to the mortgage lender. The equity release switch principle works in exactly the same way.
New equity release schemes have greater benefits
In addition to the cheaper cost of borrowing, many lenders with whom you can swap equity release schemes to have now developed much more flexible lifetime mortgage plans.
For example, you could select a new lender with various penalty free options. The most recent innovations in the lifetime mortgage market are:
Lifetime mortgage plans with Hodge Lifetime & Aviva where voluntary repayments of upto 10% per annum can be made each year. These ad-hoc repayments enable you to ‘control’ the future balance of the loan. This could be to maintain a level balance or even use it as a capital & interest mortgage by repaying the whole balance over a set number of years.
Downsizing protection option from Hodge Lifetime which allows full repayment of the plan after 5 years by “trading down” your home. Therefore, if you move house & downsize you have the option to clear the whole mortgage debt & end up equity release ‘free’.
Depending on the value of your property, you could remortgage to a new drawdown lifetime mortgage where a cash reserve facility could be established for ready access to further loans in case of future need ( a great way of protecting a surviving spouse on a reduced income)
The option to protect a percentage of the eventual sale proceeds of your home with a guaranteed inheritance protection option for your children and beneficiaries.
So why consider switching from Papilio UK now?
The present economic conditions will not last for ever. Long term interest rates have started to creep up and the recent increase in property values in certain parts of the country might not be sustained. The Governor of the Bank of England warned over the weekend about the danger of the property “bubble” bursting, and this could remove from those with larger loans the opportunity to escape the higher interest rates charged by Papilio.
In our opinion, the time to act to escape Papilio UK equity release mortgages is NOW before interest rates increase and property values fall. And if you intend to take action then swapping equity release scheme from Papilio could be your recommended ‘escape route’.
For further information, or to receive a FREE initial consultation, please contact me, Mike Vicary, on 07795 195302 or if you prefer email [email protected] where I would be more than happy to discuss your options.
The Papilio UK remortgage process
In the meantime it would be advisable to write to Papilio UK to obtain an up to date redemption statement to include all fees and the ongoing daily accrual of interest. Their address is:-
PO Box 1003, Ipswich, Suffolk, IP1 9UZ (Tel: 0844 8464716).
Armed with this information, I can then discuss with you your financial position and future plans and make a formal recommendation, if appropriate. You would receive clear details of the benefits to you of the Papilio UK remortgage and a full breakdown of costs.
Assuming you accept my recommendations, then we would complete the application paperwork at a mutually convenient home visit (preferably with family members present) or by post.
Following that Equity Release Supermarket would then oversee the valuation of your home by the new lender and we would instruct your solicitor on your behalf.
(We would strongly suggest appointing a specialist solicitor from our recommended panel to ensure that the transaction is completed as quickly and efficiently as possible.)
Our new business administration department would then manage your equity release application through to a successful completion by liaising with your new provider, solicitors & yourself. Once arranged, the Papilio UK equity release mortgage would have been repaid & the outstanding balance transferred to your new lifetime mortgage company & taking full advantage of the new lower rate &/or additional borrowing.
The time to take action is now!
Please do contact me for a free consultation on 0800 678 5159 or email [email protected] .