Remortgage Your Equity Release And Save Thousands

An equity release scheme isn't always forever. Remortgage now, when rates are falling, and you could save thousands.

I always thought of equity release as something you set up with the intention of sticking with for the rest of your life.

Rather like marriage, but with early redemption charges.

This is because most equity release schemes carry stiff exit penalties if you want to pay off your loan, particularly in the first five years.

Certainly, I never thought of equity release as something you might hawk around the market in search of a better rate of interest.

Until, that is, I received a missive from specialist equity release advisers Key Retirement Solutions, claiming pensioners are wasting thousands by failing to consider the option of remortgaging their lifetime mortgage.

And if you're fit, sprightly and have an enviable genetic inheritance, the savings could run into tens of thousands.

I'm sure they're right. Lifetime mortgages are still a relatively new product, most schemes are less than five years old, and I doubt that all but a handful will have got round to remortgaging.

When you examine the figures, it is well worth considering.

Please release me

So far, equity release appears to have been spared the ravages of the credit crunch. The only shadow is that with house prices falling, anybody considering a scheme will find they have much less equity to release.

People who have already unlocked equity from their home don't have to worry about that. Better still, growing competition in the market has forced interest rates down to as low as 6.09%, around 1% less than in 2003.

Key Retirement Solutions takes as its example a real case study of somebody looking to remortgage £98,791.

After 10 years on their original 7.3% fixed-rate from Northern Rock they would owe £204,256 while after 15 years the debt would have increased to £293,909.

If they switched to a leading fixed-rate of 6.49% from Just Retirement, they would owe £187,145 after 10 years (£17,111 less) and £256,285 after 15 years (£37,624 less). These figures assume that all the costs of remortgaging are added on to the loan.

Now a saving of £37,624 is well worth having, even if it is stretched over a lengthy 15 years.

These figures are also a handy reminder of the dramatic effect that compound interest can have even on relatively small interest-rate differentials.

So if you or your parents took out an equity release gives several years ago, it's worth taking a second look.

Of course, you won't actually save this cash yourself. I'll break the news gently: you'll be dead.

But your loved ones will be laughing all the way to the bank. Well, maybe not laughing, but at least they will feel financially better off.

Re-release

But will people follow Key Retirement Solutions' (not entirely disinterested) recommendation to remortgage. I wonder.

Setting up an equity release scheme is a lengthy and involved process. You need to speak to an independent adviser who understands the market, a solicitor, and your family or anybody who stands to benefit from an inheritance.

Typically, the process will take two to three months, so it is hardly surprising that once they have set up the scheme, most people won't want to go through the process again.

Merciful release

By the way, doesn't that strike you as a hell of a lot - an extra £200,000 after 15 years - especially when house prices are travelling in the opposite direction. You might need that no-negative equity guarantee.

As Which? recently pointed out, taking out equity release should really be a last resort after you have considered all the other options, such as getting help from your family, downsizing to a smaller property, and claiming every state benefit that you are due.

And once you have taken out a scheme, it is clear that your options still haven't ended. Is there no rest?

More: Release Equity Or Downsize Your Home

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