Time to review your existing lifetime mortgage?

Those who used equity release to repay debt seem to be driven by the low-fixed rates on offer with 30% taking the opportunity to rebroke an existing equity release plan

In the right circumstances, equity release is a flexible financial planning tool that can increase retirees’ options in later life. 

The Equity Release Council’s Quarter 1 2021 report stated ‘Property wealth has performed well even amid the economic disruption, and with the successful vaccination programme feeding through into consumer confidence, many people may be revisiting their financial priorities.’ 

During an unsettling year, the ‘uses’ that remained constant were repayment of debt (48% of the proceeds) and gifting (22% of the proceeds). Those who used equity release to repay debt seem to be driven by the low-fixed rates on offer with 30% taking the opportunity to rebroke an existing equity release plan, 29% to repay an outstanding mortgage and 14% to repay credit card debt. Source Q4 2020 Key Market Monitor.

Homeowners who took out a lifetime mortgage only 4 years ago could be on an interest rate of 6%. Defaqto, an independent service that compares financial products, reported in 2017 the average interest rates was 5.99%. This rate is no longer competitive given the average equity release product rate at the end of Q4 2020 was 2.8% according to the Key Market Monitor.

If you already have a lifetime mortgage you could switch lenders and you may be able to save money and release more. Equity release will have an impact on the amount of inheritance you can leave your beneficiaries and may affect means tested benefits now or in the future. 

Interest rates have changed over time and there are many different products out there with lots of features. Such features include inheritance protection, downsizing protection and the ability to make voluntary payments to the mortgage, these may not be a feature of your current plan. If this is the case you may be able to access these additional benefits by switching your lifetime mortgage. 

You may also qualify for an enhanced plan if you have certain health conditions this enables you to release more equity.

By speaking with Harbour Equity Release you could find out if switching could get you a better deal. By repaying a lifetime mortgage early there may be early repayments charges applicable.

If we can switch your lifetime mortgage we will and in doing so we will search the whole of the market. Equity release is a lifetime commitment, which is why Harbour Equity Release will guide you through the process and provide advice that’s right for your circumstances both now and in the future.

Moving your plan will depend whether you qualify for the latest plan developments, the amount outstanding on your equity release plan including any interest that has accrued and any potential early repayments charges that may be applicable.

Sources:

https://www.keyadvice.co.uk/about/market-monitor?page=1
https://www.defaqto.com/media-centre/press-releases/10-things-to-consider-when-thinking-about-equity-release/

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