There is some good news for those who have already done equity release – rates are coming down and they may be able to remortgage to a better one. A financial adviser friend of mine recently remortgaged a client away from their 7.85% equity release plan to one with a rate of 6.10%. Just like other mortgages, redemption penalties need to be taken into account. Some plans don’t have redemption penalties at all (although this is rare), some have them for just the first 5 years and some have them for the life of the plan.
Equity release redemption penalties can be complicated to work out – in fact some are actually based on gilts pricing so the redemption amount can go up or down from month to month. One provider recently took over 20 minutes to explain the redemption penalty calculations to my financial adviser friend – not because he took a long time to understand it but because that’s how long it takes to describe it! Laughable but also rather strange as it’s not necessarily a punitive redemption penalty – it’s just complex. Just as well you can’t do equity release without a qualified financial adviser!
Anyway, this isn’t meant to be another negative post – rates have really improved and that’s a good thing for new and existing equity release customers.