Switching Equity Release 

What kind of equity release do you have?

Equity release is a broad term that covers two types of products: lifetime mortgages and home reversion plans. Many households have used these options to unlock cash from their homes.

This guide is specifically for those with lifetime mortgages.

Not sure if you have a lifetime mortgage or a home reversion plan?

Here’s the difference:

With a home reversion plan, you sell a portion of your home (usually below market value) to a lender in exchange for an interest-free lump sum or regular payments. This means you’re no longer the sole owner of your property.

Unfortunately, if you have a home reversion plan, you can’t switch it, so this page won’t be helpful for you.

How does switching equity release work?

Just like you might switch car insurance or energy providers to get a better deal, you can also switch your equity release plan.

However, this process should be done with the help of an authorised equity release adviser.

A qualified adviser can compare your current plan with the latest options from the best equity release companies.

If your property has increased in value since you took out your plan, you might be able to release more money.

Additionally, your age or any medical conditions you’ve developed could qualify you for extra funds.

You might also benefit from lower interest rates if they have dropped since you first arranged your plan.

Plus, you’ll learn about new features that could be helpful for you and your loved ones, such as interest payment plans or inheritance protection.

Could switching lifetime mortgage plans save you money?

The potential to save money by switching depends on your circumstances, including your current interest rate and the amount you borrowed.

If you took out your lifetime mortgage when interest rates were higher, you might be able to secure a better deal now.

Although lifetime mortgage rates decreased after 2016, recent trends have seen them rise again along with overall interest rates.

An equity release adviser can assess your situation and advise whether switching to a different plan could save money by comparing your current rate with today’s options.

Am I eligible to switch equity release plans?

If you’ve had your equity release lifetime mortgage for at least a year, you may be eligible to switch to a better deal. Your eligibility and whether it’s worthwhile to switch will depend on the details of your current plan.

A qualified adviser can assess your situation to see if you qualify and whether a more competitive deal is available. If you’re eligible, they can handle the entire process for you, making it as straightforward as possible.

How long does it take to switch equity release plans?

The process usually takes around eight weeks from application to receiving the funds.

However, the exact timing can vary based on factors like the type of property you have, so it might be quicker or take a bit longer in some situations.

What costs should you expect when switching equity release?

Switching to a new equity release plan comes with certain costs, much like taking out a standard mortgage. Your adviser will explain these expenses in detail before you make any decisions, but here’s a general breakdown of what to expect.

Your new lender will usually charge fees for property valuation, loan arrangement, and deal finalisation. You’ll also need to pay legal fees to your solicitor. The good news is that some of these costs can often be covered by the funds you release, so you might not need to dip into your savings.

Advisers typically charge a fee for their services, but this only applies if you proceed with the switch and the new plan is successfully implemented. The initial advice and information they provide should be free and without obligation.

Once your new plan is in place, there usually aren’t any ongoing charges, with one possible exception: an early repayment fee.

This might apply if you decide to pay off part or all of your lifetime mortgage before it’s due, such as if you pass away or move into long-term care. Your current provider might also charge this fee when you switch to a new plan.

How much more could you access by switching your equity release plan?

The amount of extra cash you could unlock by switching your equity release plan depends on your current situation. For example, as you’ve aged since first setting up your plan, you may now be eligible to release a higher percentage of your property’s value.

If your health has changed, you might qualify for an enhanced lifetime mortgage to access even more funds. These enhanced plans consider health conditions, lifestyle choices, and the value of your home.

Your adviser can help determine whether you qualify for these enhanced terms and calculate how much more you could release during your consultation.

Can you transfer your equity release plan if you move?

If you’re planning to relocate, you have a couple of options: you can either transfer your existing equity release plan to your new property or explore a new deal.

Many modern lifetime mortgages are designed to be transferable, meaning you can potentially take your mortgage with you when you move.

However, lenders often have specific requirements regarding the types of properties they’ll accept, which might limit where you can transfer your plan.

Typically, properties that may not qualify for porting include:

• Studio or basement apartments
• Flats or maisonettes in blocks managed by local authorities with more than four floors
• Retirement homes
• Mobile or static homes
• Houseboats
• Farms
• Hotels
• Guesthouses or bed and breakfasts

These properties are generally excluded because they may be harder to sell, have more volatile values, or carry higher maintenance risks.

Lenders prefer properties that are easier to resell and maintain their value over time, reducing their financial risk.

If you anticipate moving in the future, it’s crucial to ensure that any new lifetime mortgage plan you’re considering can be transferred and to understand the conditions under which the lender allows this.

What’s the difference between ‘downsizing protection’ and a ‘portable’ mortgage?

When looking at lifetime mortgages, it’s essential to understand the difference between downsizing protection and a portable deal, especially if you think you might move house in the future.

Downsizing protection is a feature that allows you to repay your mortgage without facing an early repayment charge if you move to a new property that doesn’t meet your lender’s criteria for transferring the mortgage.

This can happen if your new home doesn’t qualify under the lender’s rules or if they’re unwilling to lend the same amount on the new property.

On the other hand, a portable mortgage is one that you can take with you when you move as long as the new property meets the lender’s standards.

If the new property doesn’t qualify, downsizing protection can be a valuable safeguard, letting you repay the mortgage without extra fees.

If moving house is a possibility, it’s worth ensuring that your lifetime mortgage includes downsizing protection. This will give you more flexibility if your new home isn’t suitable for transferring the existing mortgage.

Switching my existing deal isn’t worth it—how else can I reduce what I owe?

If switching your equity release plan doesn’t make sense for your situation, there are still other ways to potentially reduce the overall cost of your lifetime mortgage over time. Here are a few options you might consider:

Make or increase repayments

If your lifetime mortgage allows it (some older plans may not, so it’s essential to check with your lender), you can start making repayments toward the interest or principal.

Doing so can help lower the amount you owe in the long run.

However, most plans limit how much you can repay each year without incurring penalties—usually capped at around 10% of the outstanding balance. Be sure to confirm what’s allowed with your lender.

Pay off the mortgage in full

Another option is to completely pay off your lifetime mortgage, which often involves selling your property to generate the needed funds.

Alternatively, you might use a windfall, such as an inheritance or a payout from a life insurance policy.

Remember that paying off the loan early might trigger an early repayment charge (ERC), which could be in the thousands or tens of thousands of pounds. Despite this cost, it might still be worthwhile if you’re concerned about how much you’ll owe in the future.

If you’re thinking about paying off your loan entirely, it’s a good idea to ask your lender for a settlement figure and find out if there will be any early repayment charges on top of that amount.

This way, you can make an informed decision about whether this is the right move for you.

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