If you took out a lifetime equity release 5 or 10 years ago or even longer ago, it may be worth considering a full remortgage of your equity release scheme.
In February 2000, Bank of England base interest rates were 6%pa. In February 2009, interest rates were 1.00% pa. At the time, this could have meant Lifetime Mortgage Equity Release rates were around 8-9% dropping to around 6% in 2010.
Today, you can secure fixed rate lifetime mortgages with rates of between 2.5% and 3.5%pa. This is a huge difference.
We spoke with a client who took out a lifetime mortgage in 2011, with a rate of over 6%pa. Recently, they approached the lender for a new top up equity release loan which offered a rate of just over 3% for the top up only, leaving the original at over 6%.
We then got involved and talked this through with the client. To redeem early i.e. pay off the old scheme had penalties of around £16,000. We then compared moving all borrowing plus the penalties plus the new required amount of borrowing to a brand new scheme both with the existing lender and also new lenders. This worked out that the client actually owed £16,000 more but because the rate had been slashed by more than 50% i.e. over half, the amount of interest rolling up over the next 5, 10 and 15 years made a huge saving to the client. In this particular the case, the client was initially worse off for 32 months due to the penalty and higher borrowing but they broke even with the overall debt at similar levels at month 28 had they kept the old scheme with a top up, but at years 5 the client will now owe £17,500 less, at 10 years they will owe £70,800 less and at 15 years (if still alive) they will owe £151,900 less.
This is a huge saving for the family and estate in the longer term.
We have built an equity release savings modeller if you would like to contact us about your equity release scheme about how much you might save if you remortgaged your equity release scheme onto a lower rate.