Switching Equity Release Plans in 2024

Are You Considering Switching Equity Release Plans in 2024? Find Out When to Switch Plans and What Factors to Consider. Get All the Answers You Need Here.
  • Last Updated: 02 Feb 2024
  • Fact Checked
  • Our team recently fact checked this article for accuracy. However, things do change, so please do your own research.

Contributors:

Francis Hui

Key Takeaways

  • The process to switch your equity release plan involves assessing your current plan, comparing alternatives, consulting with a financial adviser, and finalising the switch with your new provider.
  • Depending on your current contract, you may be able to switch providers without penalties, but this often depends on the specific terms and conditions of your plan.
  • You might consider changing schemes to take advantage of lower interest rates, more flexible terms, or access to additional funds.
  • The frequency of switching plans is largely dependent on the terms of your contract and whether more beneficial alternatives are available.
  • Before changing, you should understand the potential costs involved, whether your new plan aligns with your long-term financial goals, and the potential impact on your estate and beneficiaries.

Did you know that by switching equity release plans you can benefit from voluntary no-penalty repayments if you do not have that option in your current plan, or even lower interest rates? 

In the first quarter of 2024, 190,374 equity release borrowers paid off £102mln through penalty-free part repayments and saved £116mln in future interest costs.1

Are you an existing equity release customer who should review your plan?

In This Article, You Will Discover:

    By reviewing your current plan and shopping the market to find better benefits, greater flexibility, and lower interest rates, you can save yourself money, and even have extra for your family to inherit.

    Our team at Every Investor has researched the potential benefits of switching equity release plans.

    Therefore:

    What Are Equity Release Schemes?

    For homeowners aged 55 and above, equity release presents an opportunity to unlock the value of their home without the need to sell.

    It provides funds in the form of a lump sum, regular payments, or both, with the house serving as security.

    Equity release schemes in the UK primarily includes lifetime mortgages and home reversion plans.

    These options are particularly useful for supplementing pension income, undertaking home improvements, or managing healthcare expenses in retirement, providing adaptable financial support.

    Can You Transfer Your Equity Release Plan to a Different Provider?

    Yes, in specific situations it is possible to transfer your equity release plan to a different provider.

    This process, known as remortgaging, allows you to explore competitive interest rates or more flexible features.

    However, be aware that early repayment charges might apply, which is why professional advice is pivotal.

    You should consider a thorough review of your current plan and market conditions before jumping ship.

    Remember, transferring your plan should fundamentally improve your financial status, not put you at a disadvantage. It's about making smart, informed decisions.

    Why Switch Equity Release Plans?

    You may consider switching equity release plans if you have had your plan for a while and you have noticed some newer, more innovative options on the market.

    With another plan, you may:

    • Save money through better interest rates.
    • Get greater flexibility in repayment options.
    • Access additional features or benefits.
    • Find a plan that can be customised to your specific financial goals and preference.

    Consider this:

    Lower interest rates, and other features, can potentially mean more inheritance for your family at the end of the day.

    Did you know that 1 in 3 equity release plans now offer you the benefit of safeguarding a portion of your property’s value through an inheritance protection benefit?2

    More importantly:

    You may also increase your borrowing amount by switching plans, especially as property values and personal circumstances change.

    How Does Switching Equity Release Plans Work?

    How switching equity release plans works is by transitioning from your current plan to a new one, typically by using the proceeds from the new plan to repay the existing one.

    Take note:

    When considering switching equity release plans, you must seek advice from independent financial advisors or equity release specialists. 

    You can contact your current lender or financial advisor as a starting point.

    Am I Eligible to Switch Equity Release Plans?

    You may be eligible to switch equity release plans depending on the terms of your existing loan, as well as your age, health, and property value. 

    You must consider that:

    • Some plans may have restrictions or penalties associated with switching, such as early repayment charges or specific timeframes.
    • 96% of all equity release products come with fixed early repayment charges (ERCs) which typically decrease to 0% over time on a sliding scale.3
    • Age plays a significant role as older borrowers can generally access more equity on their homes.
    • The value of your property must meet the requirements of the new plan you are considering switching to.

    When Can I Switch My Equity Release Plan?

    When you can switch your equity release plan is determined by the terms and conditions of your current plan. 

    Lender-dependent:

    There may be specific timeframes or lock-in periods during which switching is not permitted without incurring penalties or charges. 

    These restrictions are designed to ensure stability and consistency in the equity release market.

    It is important for you to be aware of any penalties or fees associated with early repayment or switching before the designated time. 

    How Do I Switch Equity Release Plans?

    How you switch equity release plans is not much different from the process of applying for your original plan. 

    There are several steps to take.

    These are:

    1. Seek guidance from an independent financial advisor, broker, or equity release specialist familiar with the switching process.
    2. Check for any restrictions on switching within your current plan.
    3. Assess available options to determine if a switch is beneficial and aligns with your interests.
    4. Provide necessary documentation and fill out forms from the prospective plan provider.
    5. An updated valuation of your property will be conducted.
    6. Engage a solicitor to assist with the legal aspects of the switch.
    7. After the new plan's approval, settle the outstanding balance of your current equity release using funds from the new plan.
    8. Your newly selected equity release plan will then be activated.

    How Often Can I Switch Equity Release Plans?

    How often you can switch equity release plans is determined by individual providers and their policies. 

    Some providers may impose limitations on how often homeowners can switch, while others may allow more flexibility. 

    It is essential to review the terms and conditions of both the existing and potential new plans to understand any restrictions.

    Do so with the help of a qualified financial advisor or broker to determine if there are any restrictions or penalties associated with switching. 

    When Should I Avoid Switching Equity Release Plans?

    You should avoid switching equity release plans when the existing plan has substantial early repayment charges or penalties, market conditions are not favourable, and / or your current plan has low rates and good benefits.

    There are certain scenarios in which homeowners should exercise caution or avoid switching equity release plans.

    Such as when:

    • The costs associated with exiting the current plan could outweigh the potential benefits of switching.
    • Interest rates are high or property values have significantly decreased.
    • You are well into your later years, and switching equity release plans may not provide enough time to recoup the costs associated with switching.
    • The current property value is not sufficient to meet the requirements of a new equity release plan.

    Pros and Cons of Switching Equity Release Plans

    Switching equity release plans can offer pros such as access to better interest rates, but there are also potential cons to consider.

    More details:

    Advantages and Benefits

    Advantages and benefits of switching equity release plans are aimed at getting a better deal and more equity.

    If the market is right, these benefits may include:

    • Saving money on interest rates
    • Increasing your borrowing potential
    • More flexibility in repayment options
    • Better benefits

    Disadvantages

    On the other hand, there may be factors that count against switching plans.

    Think about:

    • Significant early repayment charges
    • Additional set-up costs and fees
    • Eligibility for means-tested benefits4
    • Not getting the right advice

    What Fees and Factors Should You Consider When Switching Equity Release Plans?

    The fees and factors you should consider when switching equity release plans include early repayment charges (ERCs), arrangement fees, valuation fees, legal fees, and any potential penalties associated with switching to the new plan. 

    Assessing these costs is crucial in determining the financial viability of switching.

    Some of these costs include:

    • Arrangement fees: Any administrative costs of setting up the new plan, which can vary between providers.
    • Valuation fee: Typically required when switching equity release to determine the current market value of your property.
    • Legal fees: Engaging a solicitor is recommended by the Equity Release Council to represent your interests.5
    • Potential penalties: Early repayment charges (ERCs) or other penalties levied by your current provider.
    • Interest rates: A lower interest rate can result in cost savings over the long term.
    • Borrowing limitations: Evaluate whether the new plan allows for increased borrowing amounts.
    • Flexibility: Assess features such as repayment options. 

    With so many considerations, it is imperative to consult a qualified equity release advisor or broker to determine the viability of switching plans in your situation.

    Things to Consider When Switching Equity Release Plans

    Things to consider when switching equity release plans are interest rates, fees, potential penalties, eligibility requirements, and the reputation of the new provider. 

    It is essential to compare different options and evaluate their long-term impact on personal finances.

    Some things to consider:

    • Determine whether the new plan offers a lower interest rate, as this can significantly impact the overall cost of borrowing.
    • Assess whether the new plan allows for increased borrowing amounts, which may be important if you require additional funds or have experienced a change in financial circumstances.
    • Consider the fees associated with switching equity release plans mentioned above.
    • Review the eligibility criteria for the new plan, such as age, property value, and health. 
    • Assess the flexibility offered by the new plan, such as partial repayment options and inheritance protection guarantees.
    • Research and evaluate the reputation and reliability of the new equity release plan provider through customer reviews, industry ratings, and the provider's track record. 
    • Seek guidance from an independent financial advisor or broker, or equity release specialist to help you navigate the switching process.

    Which Equity Release Providers Should You Consider When Switching Plans?

    Equity release providers you should consider when switching plans should be members of the Equity Release Council6 and authorised and regulated in the UK by the Financial Conduct Authority7, with a track record of delivering quality service. 

    Some well-known equity release providers in the UK include:

    • Aviva is one of the largest providers of equity release plans in the UK, offering a range of options and has a reputation for providing competitive interest rates and flexible plans.
    • Legal & General is known for their transparency, customer service, and competitive offerings.
    • Just Group offers a range of innovative products and has a strong reputation in the industry.
    • LV= is a well-established provider offering equity release plans with flexible features and competitive rates.
    • Hodge Lifetime offers a range of lifetime mortgage options and has a reputation for its customer-focused approach.

    How Can I Compare Equity Release Providers?

    How you can compare equity release providers is on a like-for-like basis, where one provider may offer low interest rates they may not have great flexibility, while another may have better repayment options but lack in the customer service department.

    Consider the following questions:

    • Do they have positive reviews on independent comparison sites, such as TrustPilot?8
    • How do interest rates compare?
    • Are it's maximum lending amounts comparable?
    • What repayment options does it offer?
    • How are the fees structured?

    By asking these questions, and with the advice of a reputable equity release broker, you can effectively compare equity release providers.

    Can I Switch Equity Release Plans with a Different Provider?

    Yes, you can switch equity release plans with a different provider for an option that offers you better benefits and cost savings than your current provider.

    However:

    You can also opt to switch plans with one offered by your existing lender.

    The key is to identify the plan that best aligns with your financial needs and goals, whether with your current provider or a different one.

    Is Switching Equity Release Plans Right for Me?

    Determining whether switching equity release plans is suitable depends on individual circumstances,  including long-term financial goals, current plan terms, potential benefits, costs, and eligibility. 

    Deciding if switching equity release plans is the right choice for you requires careful consideration and assessment. 

    Here are some key factors when reviewing your existing equity release mortgage:

    • Consider your current and future financial goals.
    • Conduct a cost-benefit analysis to evaluate the potential advantages and disadvantages of switching.
    • Evaluate the suitability of the new equity release plan. 
    • Review the terms and conditions of your current equity release plan. 
    • Seek guidance from an independent financial advisor to assess your circumstances.

    Common Questions

    What Are the Steps to Switch Your Equity Release Plan?

    Can You Switch Equity Release Providers Without Penalties?

    Why Would You Consider Switching Your Equity Release Scheme?

    How Often Can You Switch Your Equity Release Plan?

    What Should You Know Before Switching Your Equity Release?

    What Are the Types of Equity Release Plans Available for Switching?

    Do I Need a Solicitor for Switching Equity Release Plans?

    Are There Any Penalties for Switching Equity Release Plans?

    What Happens if I Change My Mind After Switching Equity Release Plans?

    How Long Does the Switching Process Usually Take?

    What Happens to My Current Equity Release Plan if I Switch to a New One?

    How Does Switching Equity Release Plans Affect the Amount I Can Borrow?

    Can I Switch Equity Release Plans if My Property Value Has Changed?

    What Documentation Do I Need to Provide When Switching Equity Release Plans?

    Can I Switch Equity Release Plans if I Have Health Issues or a Change in Circumstances?

    Are There Any Tax Implications When Switching Equity Release Plans?

    Conclusion

    Switching equity release plans can offer homeowners improved terms, increased borrowing amounts, or greater flexibility. 

    Regularly reviewing your plan is essential to stay aligned with your changing needs.

    Before making a decision, it is vital to thoroughly assess the benefits, costs, and eligibility criteria involved.

    Seeking independent financial advice, comparing providers, and involving solicitors can facilitate a smooth and well-informed process when switching equity release plans.

    The features mentioned and the amounts raised, are subject to the lender’s criteria, terms and conditions. These may take into account the age, health and lifestyle factors in order to provide an enhanced amount. To understand the features and risks, ask for a personalised illustration.

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