Equity Release Remortgage – Can you save money by switching?

Martyn and Jacqueline took out a lifetime mortgage back in 2013 and used the money to have a conservatory built on the back of their bungalow in Stretton, which was sadly starting to show signs of age. When they first contacted me, they didn’t think I’d be able to help them, as they’d already released equity from their property. However, after I’d met with them and examined the loan they had in place, I was convinced we could do was something to help them.

As shown in the latest report from Key Retirement, remortgaging existing equity release plans is becoming more popular, particularly due to the historically low interest rates that are now available. Having said this, many of those who’ve released equity from their property in the past aren’t aware that the current rates could give them new options.

Remortgaging a lifetime mortgage works similarly to remortgaging a traditional mortgage. As an adviser, I check how much interest is currently being charged on the existing loan, what the early repayment charges associated to the loan are and whether remortgaging the plan to a new lender will provide any benefits.

In Martyn and Jacqueline’s case, they were paying an interest rate of 6.25% on an initial loan of £20,000, which was based on a property value of £180,000 when they took out the loan in 2013. Based on the sharp increase in property prices that occurred during the Covid-19 pandemic, I estimated that the property was now worth £250,000, and the outstanding loan amount was just over £34,000. We also needed to take into account an early repayment charge of £5,000 that was payable if we decided to remortgage away from the current provider.

Martyn and Jacqueline needed £20,000 to replace their existing conservatory. We were able to remortgage their existing loan, including the early repayment charge, and begin a new plan with a different lender that was offering a lifetime fixed interest rate of 3.60%. Not only were Martyn and Jaqueline now able to replace the conservatory at the back of their bungalow, but they were also paying a much lower rate of interest on the loan!

With interest rates at historically low levels, I’m seeing more enquiries from people like Martyn and Jacqueline who wish to check what equity release remortgage options are available to them.

If you’re asking, “May I remortgage my equity release?” the answer is, yes, you may. We’ll always work out the benefits of remortgaging your lifetime mortgage, including taking account of any existing early repayment charges before advising whether this is the right solution for you!

If you’d like to review your current lifetime mortgage, or if you have parents or grandparents who took out a lifetime mortgage over five years ago and you feel they could benefit from a review, I’d be very happy to have a chat.