With the ongoing changes to our circumstances and needs, it is vital to review your finances regularly. You may be concerned that taking an equity release plan now could impact your ability to borrow further funds in the future.
You can take equity release more than once. There may be additional funds from your existing lender, which you can release with a drawdown plan or by a further advance. Alternatively, you can replace your existing equity release plan with a new one that repays your current lender and provides you with additional funds.
You should discuss your requirements with an equity release advisor who can research the best option for you to take.
Average equity release interest rates have continued to fall year on year too. So, even if you do not need additional funds, you may be able to save your estate thousands of pounds by replacing your existing equity release.
Drawdown equity release plans provide you with an initial lump sum and also afford you the flexibility of releasing additional funds in the future from a reserve facility. The reserve facility acts a little like a savings account for you to access when you need it. While you do not earn interest on the funds held in reserve, you do not pay interest on them either!
With a drawdown lifetime mortgage, you contact your equity release lender to access funds held in reserve. Your lender provides you with a new mortgage offer. Upon your acceptance, the money is transferred directly into your bank account. You can typically draw a minimum of £2,000 each time, but this does vary by plan.
The most significant advantage of a reserve facility is that you do not need to have another property valuation or any further financial or legal advice. All the hard work is completed at the outset of your plan, so you can enjoy quick access to your funds as you need them.
Even though you can access your reserve facility directly, I always recommend getting in touch with us to review your options. It may well be that you could save money by retaking equity release with another lender. When switching the equity release plan, you can also change the amount held in reserve; Potentially increasing it if you think you need more money again in the future.
Once your reserve facility has been exhausted, you will need further financial advice and an additional property valuation to obtain additional funds.
From here, the options are to take a further advance on your existing equity release or replace your current plan with a new one.
Let's explore these options in greater detail.
Suppose you have an existing equity release plan but have used up any reserve facility. In that case, you may still be able to obtain additional funds while remaining on the same plan.
A further advance from your existing equity release provider can provide you with the funds required. To obtain a further advance, you must receive additional financial advice, and a new survey will need to be completed on your home. An offer is issued for the additional funds with its own interest rate. The terms and interest rate on your existing equity release remains unchanged.
While a further advance is quite often the fastest way to release additional funds, it may not be the most cost-effective.
It would be best if you also considered replacing your existing equity release plan with a new one. This will allow you access to a broader range of plans, with the potential to release additional funds and also benefit from the latest interest rates.
If you have an existing equity release plan, you can replace it with a new one. Like re-mortgaging, you can re-equity release to benefit from lower interest rates, borrow more money, and access plans with additional features.
Average equity release interest rates have continued to fall, and you could benefit from replacing your existing equity release with a new plan. The potential savings to your estate can be tens of thousands of pounds.
There isn't a quick way for you to personally calculate savings on plans with lower interest rates that are more suitable though. That is where we step in. We offer a free equity release review, whereby we produce a report detailing any potential amounts of money that you could save by switching. We also provide you with details of any extra funds which you could release.
Imagine the difference that could make; being able to access further funds without costing you more or passing the savings onto your loved ones.
When considering how much you could potentially save, we first examine your current equity release plan and why it was originally recommended to you. This includes taking into consideration your circumstances, along with any property underwriting criteria which may have been considered.
We then request a current balance from your existing provider, along with details of any early repayment charges. This gives us an amount of money to source from the broader market to see if there are any lower interest rate plans available.
The final step is to forecast how long you, and the lender, expects the plans to last. We can then consider the expected total cost over the term, and therefore can provide details of any potential savings to be made over the lifetime of the plan.
Let's look at an example:
MR AND MRS SMITH
Aged: 62 and 63
Plan arranged: April 2017
Interest rate: 4.20% AER
Estimated term remaining: 25 Years
NEW LOWER RATE PLAN
Interest rate: 2.92% AER
TOTAL SAVINGS OVER ESTIMATED TERM
By replacing your existing equity release plan with a new one, you may unlock new features previously unavailable. You could add a reserve facility which you could draw upon as you need more money in the future, or a plan which allows for repayment by Direct Debit.
Let's explore some of the latest features you could take advantage of with a replacement equity release.
- Drawdown plan - With a pre-agreed reserve facility to draw upon as you need more money
- Monthly Direct Debit payments
- Voluntary payments by bank transfer
- Downsizing protection - Allowing you to repay without penalty if you sell your home
- Inheritance protection - Protect some of your property to leave as a guaranteed inheritance
- Significant Life Event exemption - An excellent feature for joint borrowers
- Medically enhanced plans - Access to more money and lower interest rates
If any of these features are important to you, please get in touch, and we will be able to replace your current equity release plan with a new one.
If you have further questions, why not speak with one of our qualified advisors?
Call us on 0207 158 0881 or use our online form to book your FREE consultation.
While a qualified equity release advisor has written this guide, it is not intended to be used as financial nor legal advice and should not be relied upon.
To understand the full features and risks of an Equity Release plan, ask for a personalised illustration.
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