Should I Remortgage My Equity Release Plan? Part 2

For starters…the review of your existing equity release plan should be undertaken by an equity release specialist with the relevant qualifications. They should be well versed with the current market, preferably have an in depth knowledge of the older equity release plans & their potential early repayment charges.In all cases the adviser should start by conducting a fact find which gathers information about the client’s up to date financial situation. During this process, the adviser will ascertain what the client’s goals & objectives are. Are they just looking to borrow further funds or looking to save interest over the longer term, or even both? At the end of the meeting a letter of authority should be obtained & signed by the client(s) which gives permission for the equity release provider to divulge information on the clients particular plan.A redemption statement should then be requested on behalf of the client, which upon receipt will inform the adviser of material facts that will enable them to provide best advice. The contents of the redemption statement usually includes compounded interest to date, any early repayment charge & any further costs incurred by the lender for closing the account.The adviser has two courses of action from here dependent upon the clients objectives; to contact the existing lender to see what can be offered in addition to the existing plan if the client is merely looking to borrow further funds.Alternatively, research can be conducted from the whole of the market to ascertain whether the client could remortgage elsewhere with an improved interest rate &/or additional borrow further funds after repayment of the existing scheme.A comparison statement can then be prepared by the adviser, illustrating the differences between the two schemes. This would include a projection of the future balances at each of their respective interest rates. The prospective new plan must taken into account the setting up costs which include; valuation fee, application fee, solicitors costs & any adviser fee.Obviously, costs will determine how long it would take for a ‘break even’ point to be reached. This is how long it takes for the savings in interest to offset the total setting up costs which can be approximately £1600. The greater the balance, the greater the savings & hence the break even point tends to be reached a lot quicker on a sizeable loan.However, with the special deals that are available in the market at present, these can reduce this ‘break even’ period particularly if a free valuation or other special offer exists.Experience has shown that interest rates from the early days of equity release could have been a high as 8%, therefore with rates as low as 6.1% at present clients can save many £1000’s over the remainder of the plan term. This would be great news, not only the beneficiaries, but also the clients future as well in case any further monies are required.The lower the future balance, the greater residual equity would be remaining, should additional funds be required again. Equity release plans are now at their most flexible & with interest rates at their lowest for some time, now may be an excellent time to conduct an review of your existing equity release plans.However, you may need to act with haste to secure a current low rate, as some providers have started increasing their interest rates which would make it less profitable to remortgage. As you can see there are many factors to consider & always obtain independent specialist advice for this reason.

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