Equity release is a big financial decision and a lot of homeowners who take them out tend to assume that because these agreements are designed to last for the rest of their life that they are something which is left to run without changing.
However, with interest rates having fallen in recent years, there are potentially thousands of people who are paying over the odds, unaware that switching equity release plans could save them a huge amount of money.
Our experts explain all about switching your equity release plan, why it could be a great option, the benefits and how much you could potentially save!
Reasons for switching equity release plans
Due to falling equity release rates over recent years, if you have an existing plan in place that was taken out more than 12 months ago then it is very likely that the rate you are paying is no longer competitive and you can benefit from swapping to a different one.
Switching to a more competitive equity release plan means that you could be able to;
Take advantage of lower interest rates
New equity release plans are becoming available all the time, not only with competitive rates but some great additional benefits such as free valuations and zero cost application fees that can make switching easier than ever. If you took out a plan several years ago then it is very likely that there is a much better plan on the market for you which could save you thousands!
Switching can help you access more equity from your home
If you are looking to potentially ‘top up’ or release more money from your existing plan, then this is the ideal time to scope out the market for a better deal. Be sure to seek advice from your equity release advisor as although the top-up would likely be at current market rates, the original loan could be based on non-competitive terms and therefore other more viable options could be better.
Unlock more features
Not all equity release plans are created equally, and some plans offer flexible features and benefits that weren’t available with previous plans such as – the ability to make repayments, guaranteed inheritance and no early repayment charges.
Moving house
If you are thinking of moving then you can port your existing plan to your new property, but it is always advisable that you check to ensure that the current plan is what’s best for your personal situation, circumstances and new home.
Things to consider before you switch
As with any big financial decisions, there are often positives, benefits and costs that need to be properly considered and looked into before signing anything and this is also true when switching equity release plans.
Early repayment charges
A great number of the older plans weren’t designed to be repaid early and so tend to have significant early repayment charges (ERCs) so your advisor will need to consider this and factor it in to work out if switching is worthwhile.
Set up fees
Setting up a new plan will usually incur costs, the amount of which will vary depending upon the plan you want to move to, but tends to work out at around £2,000.
Interest
If you do choose to switch plans, then while your application is in progress the daily interest will continue to accrue on your current plan. Your adviser will be able to help counteract this by factoring in a further 60 days interest when calculating the amount required on the application.
Take a look at our free and easy to use equity release calculator and find out all about equity release and how much tax-free cash you could potentially access from the value in your home.
