Why should I review my existing Equity Release Plan?
If you have taken out an equity release plan in the past, it may be worth reviewing your existing plan to see if a more suitable or competitive product is available to you. Due to a growing equity release market, there are more products available which offer a wider range of options than have previously been on offer. Outlined below is some information that may help you decide if a review is right for you.
As the equity release market place has evolved over time, so have the plans. In fact, the current range of products has more than doubled over the last two years to nearly 140. The greater range of products means more options are now available for customers to tailor their plan to match their needs. Some of the new features available on equity release plans include downsizing protection, inheritance protection and the choice of making ad-hoc, penalty free repayments. * The introduction of drawdown schemes has also meant that customers can consider using regular withdrawals rather than one lump-sum release, saving them money in interest as this is only payable on the capital released.
Another major reason to consider reviewing your existing plan is the fact that lifetime mortgage interest rates have reduced significantly over the years. By moving to a more competitive equity release plan with a lower interest rate, customers could save thousands of pounds in interest repayments. The average interest rate on equity release products has fallen from 5.96% in July 2016 to 5.22% in July 2018. In addition to this, in July 2018 42% of products on the market had an interest rate below 5%. * If your existing plan has an interest higher than those quoted above then it’s worth having your plan reviewed to see if it would be worthwhile switching products.
Reviewing your plan can also be a way of raising additional tax-free cash from your home. Due to house prices steadily increasing over the last ten years, the maximum amount that customers can borrow has increased. According to the Office of National Statistics UK House Price Index, the average price of a property in the UK has risen from £160,954 in Decemeber 2008 to £230,776 in December 2018.
A review of your equity release plan will take into consideration your current interest rate, early repayment charges applicable on your current plan, your current balance and set up charges of any potential new plan, all of which can all be prohibitive to switching products. The idea of reviewing your plan is to make sure you are on the most suitable plan for you, taking into account all of the above. Switching products might not be the right thing to do for everyone so it’s important that you seek specialist independent advice, however with the current rates and range of products on offer now is the ideal time to check.
Equity release may involve a home reversion plan or lifetime mortgage which is secured against your property. Equity release would involve paying off any outstanding mortgage. The equity released plus accrued interest is to be repaid upon death or moving into long-term care. An independent adviser will tell you everything you need to know about equity release, including the effects it could have on any means tested benefits you receive or the amount of inheritance you can leave.
*Statistics taken from the Equity Release Council’s 2018 Autumn Report.