Tag Archives: Early Repayment Penalties

Can I top-up my Equity Release Mortgage?

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An equity release scheme works out to be the best option for many people who own a valuable property, and need additional cash but do not wish to sell the property. Equity release is fast becoming popular as a way to add to your income during retirement. Interest rates are very competitive today, and the market has some of the most flexible equity release schemes on offer. As such, this may be a good time to explore the option of an equity release loan on your property.

For those who already have an equity release scheme in place, it may still be a good idea to shop around for alternate equity release schemes for two possible reasons. One, it may be possible to get a more competitive mortgage and make significant savings by switching, and two, because you may have exhausted your existing loan and may need an additional loan.

Some lenders do offer top up loans on existing equity release plans. If you have had your existing equity release mortgage in place for more than five years, you may be eligible to apply for a top up. There are independent advisers who can give you advice on equity release top up loans, and alternate schemes.

Some equity release lenders charge early repayment penalties if you repay the loan earlier than a certain period of time. These penalties, if any, vary with each equity release scheme but may be quite high. However, more competitive terms of modern equity release schemes may mean that in spite of an ERC you could still stand to make savings by swapping your existing mortgage for a new one.

If you have had an equity release scheme and are considering shopping around for an alternate scheme, it may be advisable to seek the guidance of an independent financial expert. Independent advice is invaluable in matters such as financial loans, and many financial advisers also handle the entire process of dealing with your existing lender and setting up the new loan.

The internet has some good resources for equity release information and comparison. You can find companies that offer financial advice and information and there are equity release calculator tools available online which may help you get a rough idea of how much additional loan you are eligible to get. Online comparison sites are also useful for equity release comparison and to find the best equity release scheme available now.

What are the early repayment charges on equity release schemes?

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Equity release mortgages are financial products, essentially loans, that allow you to free up the equity tied into your home. For those who own a real estate property and require a supplementary income, this type of loan can be the right option. This is especially true of pensioners who have a house but often require additional cash flow for a better lifestyle, medical expenses etc. There are many different types of equity release schemes, and choosing the right one requires proper understanding of the concept, as well as proper guidance.

As equity release mortgages have become more and more popular, they have also evolved and improved over time. Today, there are not only a greater number of equity release providers in the market but also a great variety in terms of the type of equity release plans. Equity release plans have also become more flexible to suit people in a wider variety of circumstances. Something that was not available a few years back may now have become accessible.

If you already have an equity release mortgage, it may be worth your while to explore the market and see whether there are better options available for you. Switching to a new lender may have several advantages, from lower interest rates to more flexible terms of lending. However, switching your equity release is not always a straightforward process. Before applying for a new loan, it is important to understand all the equity release risks associated with your existing mortgage.

Many lenders charge an early repayment penalty on their equity release mortgages. This changes from lender to lender and also varies with different mortgages. But it could be as low as 5% to as high as 25% of the total amount that is borrowed. These penalties are put in place to protect the lender from losses made on interest when a debt is repaid ahead of term. While ERCs were common until a few years ago, a more competitive market has led to many lenders scrapping this policy.

Sometimes an equity release remortgage with an alternate lender could help make huge savings, however, high early repayment penalties could cancel out any saving and make it economically unviable. In other cases it could still be viable notwithstanding a seemingly high ERC! As always, it is useful to consult a financial adviser, with expertise in the field of equity release mortgages, to help you make the right choice.