Can you switch your equity release plan? Here’s what you need to know | If you’ve taken out a lifetime mortgage, you may still have some flexibility. There are typically two main options available:
You can transfer to a new lender offering better interest rates or different terms. Alternatively, you can remain with your existing lender and choose a different product they provide. Lifetime mortgages are the most popular type of equity release in the UK. They allow homeowners to release value from their property without needing to sell. The loan is normally repaid when the property is sold, either after death or when entering long-term care.
If you’ve selected a home reversion plan, the situation is different. These involve selling part or all of your home to a provider in return for a lump sum or income. When the property is sold, the proceeds are split based on ownership shares.
With home reversion plans, switching isn’t possible. You cannot switch to another provider or modify the agreement once it is in place. That’s why it’s essential to review all terms in detail before proceeding.
Reviewing your existing equity release plan can help ensure it still matches your needs. Connect Mortgages works with more than 170 UK-based lenders. We offer advice tailored to your circumstances and current lending criteria.
Now may be the right time to consider whether your equity release plan remains suitable.
Why Consider Switching Your Equity Release Plan?
Switching your lifetime mortgage, often called an equity release plan, could improve your financial position depending on individual circumstances. If your original plan was secured when rates were high, switching might offer lower interest rates today.
Even a slight interest rate reduction can save thousands of pounds over the lifetime of your plan. Older plans often include less competitive terms compared to those now available on the UK market. The UK equity release market now offers more plans with greater flexibility than ever before. Reviewing your options is worthwhile, especially if your financial goals have changed since you first released equity. Property values have risen in many parts of the UK over recent years.
If your home’s value has increased, you might be eligible to access more funds than before. This could allow for a larger lump sum or an improved drawdown facility tailored to your needs. Funds may be used for home improvements, supplementing retirement income, or helping family members financially. More flexible plans now allow voluntary repayments without penalties, reducing long-term interest.
Inheritance Protection
Some plans also offer inheritance protection to preserve a portion of your property’s value for your family. This feature can ensure that a share of your estate remains for your beneficiaries. If your current plan does not include such features, switching might be worth considering. It’s important to assess whether newer products provide better value or flexibility than your current arrangement. However, recent increases in interest rates mean that some newer plans might not offer improved terms.
Those who secured competitive rates in recent years may find limited benefit in switching now. If your plan dates back several years, you might still benefit despite higher current interest rates. Reviewing your plan with a specialist adviser can help determine if switching is financially worthwhile. Equity release is a long-term commitment, and decisions should always be based on expert advice and up-to-date comparisons.
Why Switch Equity Release Plans?
1. Reduce Interest Costs
You may save thousands of pounds by switching to a plan with a lower interest rate. Older plans often carry higher rates. Newer options can be more competitive and include useful features.
2. Release More Equity
If your home has increased in value, you might access more funds. A fresh valuation could let you release extra tax-free cash. This can support retirement income, home improvements, or help your family.
3. Choose Better Features
Modern lifetime mortgages offer helpful features such as:
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Voluntary repayments to control interest growth
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Inheritance protection to reserve part of your estate
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Drawdown facilities to access funds in stages
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Portability, if you plan to move
Switching can bring your plan in line with your current lifestyle and preferences.
Costs and Fees When Switching
Switching a lifetime mortgage involves several costs.
Early Repayment Charges (ERCs)
Many plans include ERCs if repaid early. These are either fixed or linked to gilt yields.
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Fixed ERCs often fall over time, e.g. from 10% to 5%.
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Gilt-based ERCs depend on changes in government bond yields. You may avoid these if yields rise.
Ask your adviser to compare the cost of switching, including any ERCs, with the long-term savings you might achieve.
Other Possible Fees
You might also need to cover:
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Application Fee: £500–£600, often added to your loan or waived.
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Legal Fees: Usually £500–£600 for legal work.
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Valuation Fee: Varies by property value; some lenders waive it.
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Adviser Fee: Often £1,000, though the lender pays some.
These fees should be weighed against possible interest savings or access to more funds.
Should You Switch a Lifetime Mortgage?
Switching depends on several key factors:
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Your current interest rate
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The outstanding loan amount
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Any ERCs payable
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Current market rates and product features
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Your home’s current value
Also consider your future plans. Do you want to move home? Do you wish to preserve an inheritance? These can impact whether switching suits your goals.
How to Switch a Lifetime Mortgage
This is a regulated process and must involve professional advice.
1. Speak to a Qualified Adviser
Seek advice from a regulated equity release adviser who covers the full market. Members of the Equity Release Council (ERC) must follow strict consumer protections.
2. Choose a Suitable Provider
ERC standards guarantee:
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You can stay in your home for life
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You will never owe more than your home’s value
Free guidance is available from StepChange Financial Solutions, a not-for-profit organisation. HUB Financial Solutions also offers help reviewing and arranging plans.
3. Appoint a Solicitor
You’ll need a solicitor for legal work. Choose one recognised by the ERC for added protection.
4. Complete the Switch
Your adviser will manage the application. After approval, your new lender will transfer funds to your solicitor. They will then repay your existing lifetime mortgage.
Review Your Plan Regularly
Switching could reduce your borrowing costs or offer features that better suit your needs. Always weigh costs, future plans, and product suitability. Seek guidance from trusted, regulated professionals.
Would you like this in a downloadable or publishable format?
Richard Jeremiah-Clarke, a member of the Equity Release Council, is available to help. Please feel free to contact Richard by clicking the link below.
Thank you for reading our “Can You Switch Your Equity Release Plan?” publication. Stay “Connect“-ed for more updates soon!
