Can I repay Equity Release early?
Can I repay Equity Release early?
Over recent years Equity Release plans have evolved to include types that will accept monthly repayments, but what if your circumstances have changed and you would like to repay your Equity release plan in full?
You want to buy a property before you have sold your existing one
An Equity Release plan is designed to last for the remainder of your life, but providers have always acknowledged that situations may arise whereby someone may wish to repay their plan in full during their lifetime. Therefore, the provider's terms and conditions will show how this can be done and, more importantly, the cost of doing it.
Why pay an Equity Release Plan early?
There may be many reasons why you might want to repay your Equity Release plan in full, but generally speaking all of them can be broadly divided into two situations; either because you want to or you have to.
The costs for repaying in full are the same for both and hold the key as to whether it is a good idea.
Repaying your Equity Release plan because you want to is probably the easier to deal with, as the final choice whether you do it or not is entirely yours. Your circumstances may have changed since taking the plan and you have come into some money which is enough to pay back your Equity release plan and you need to find out whether this is a good idea. Once you have discovered the outstanding balance plus any penalties, costs, and fees, then you can make an informed decision as to whether repayment is worth it or not.
Repaying because you have to is slightly different as the two most common reasons for doing this are because you are moving house or moving your plan to a new provider. Both of these events inevitably mean that you will be in contact with professionals such as your Equity Release advisor, who will ensure that you are fully aware of the costs and penalties that will be incurred.
Remember, if you are moving house then the costs and penalties associated with your Equity release plan will be in addition to the normal costs that you will incur with the house move.
Will it cost to repay my Equity Release Plan early?
When you first take out your plan you will be given an illustration showing all the financial details of your plan including the interest rate you will be charged and how much will be owed at any given point in the future. It will also show what penalties will apply if you repay the plan early.
These penalties can be quite high and be shown either as a fixed amount or in the form of a formula that shows how a penalty will be calculated depending on things like how long you have had the plan and interest rates at that time. It can be a combination of the two.
It is very important that you thoroughly research just what penalties will apply to you before committing to repaying your plan. Some penalties can run into the tens of thousands of pounds.
If you no longer have your original paperwork, then you can request copies from your provider or from whoever originally arranged your plan. You can also speak to a qualified independent specialist in Equity Release who will be happy to go through the pros and cons of repaying your plan with you.
Do I have to use my original advisor or provider?
If you already have an Equity Release plan and are thinking of making any changes to it such as taking more money or moving home, then you are completely free to take advice from whoever you wish.
Ideally, your original advisor would be your first point of contact as they will have your details to hand and will be aware of your circumstances when taking out your first Equity Release plan.
However, there are many very good reasons why you may want to take advice from somebody different. That advisor may have moved on for instance, or they may have only been able to advise on products from one provider and you would like to take independent advice this time around.
If it has been several years since you took out your plan then checking whether a new provider offers a more competitive product is essential if you want to get the best plan for your circumstances.
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