Equity Release is too expensive....

This is something I've heard so many times over the years.

Interest rates

Of course in the past interest rates were much higher than they are nowadays, so it was definitely expensive, with rates of 7% to 8% usually.

I'm sure many will recall paying over 15% on their own mortgage too, but I've never heard anyone object to raising a mortgage on the basis it's too expensive!

Likewise I can't recall people refusing to have a credit card, despite annual rates as high as 35%. Equity release has NEVER been that expensive!

It will probably surprise most people to be told two TRUTHs about current equity release Lifetime mortgages.

1. Rates are fixed for LIFE - That's right, the interest rate will never change
2. This is the biggie........ rates start as low as 2.83% (correct at time of writing Oct 2019)

You read that right.

You can have a Lifetime Mortgage (the correct term for Equity release) that has an interest rate FIXED FOR LIFE at 2.83%.

If someone had offered me that back in the 90's on my own mortgage I would have snapped their hand off! I think my average over 25 years was closer to 6% or maybe even 7%. Not too dissimilar to an old Lifetime mortgage is it?

Penalty charges

People are also concerned by the penalty charges, better known as Early Repayment Charges (ERC's), that may be levied if you try to pay any of the Lifetime mortgage debt off.

In the past lifetime mortgages had complicated ERC's that were linked to one of the Gilt Yield Indices on the FTSE. As Gilt Yields have fallen this led to sometimes disproportionate charges. Penalties were usually applicable for a period up ton age 85 or similar, although it should be remembered that a Lifetime mortgage was never designed to be paid off whilst you were alive (the hint is in the name!).

But products have evolved, and many now offer fixed percentage ERC's, usually only payable in the first 8 to 10 years. e.g 5% for 5 years, then 4%, 3%... That's not too different to a 5 year fix rate where the ERC is payable during the fixed rate period.

Many products now allow you to pay back some or all of the interest every year too, if that's what you want to do. There are some limits, which vary from product to product, but as long as you stick to them there's no ERC payable.

Currently there are around 300 products available in the market, each with different features. There's bound to be one that meets your requirements.

Maybe it's time to reconsider your views? If someone you know has an older Equity release product it might be possible to move to a better deal, frequently without any ERC being charged. There's even possibly a chance of releasing a bit more capital into the bargain. If you'd like more info get in touch.

#LifetimeMortgage #Remortgage #EquityRelease #fixedforlife