In keeping with our ongoing equity release mortgage advice series, here’s the latest equity release mortgage article – and this one really is a game-changer.
Before we continue, it’s important to set the scene by highlighting how, when it comes to lifetime mortgages, there is generally an early repayment charge (that is, a cost associated with ending your current lifetime mortgage deal) if you change your circumstances – or your mind.
There are a number of cases where an equity release early repayment charge is waived – but these tend to either be when the equity release holder dies, or in examples where the lender retains control of the loan, such as if you want to move and the lender agrees to transfer the equity release mortgage to the new property.
Generally speaking, there aren’t really cases whereby the lender simply sets you free. But there is one – and it’s relevant right now.
Equity release and gilts
Gilts – or government bonds – are used to determine early repayment charges. To track the rise and fall of gilts, a lender will use some form of gilt index. For example, Aviva uses the UK FTSE Actuaries 15 Year Gilt Yield Index.
If, at the point of redemption – or the point at which you need to end your deal – the gilt index has fallen by 0.125% or more, then you are likely to face an early repayment charge. However, if the redemption yield is the same or higher than it was at completion, then there is no early repayment charge to pay.
As it stands, bonds have gone up. This means that there is a large swathe of the UK population with equity release mortgages who could potentially end their current deal without incurring any financial penalty.
Why it’s important
The benefits of equity release mortgages are becoming clear. Not only that, but there are competitive equity release mortgage deals entering the market all the time. So, if you’re experiencing anxiety at witnessing UK equity release mortgage rates drop and feeling frustrated that you’re locked into a less competitive deal, then you may not be as powerless as you think.
In fact, the rise in UK government bonds means that you may be able to switch to a better deal without paying any price at all. Or, maybe you’re happy with your current deal, but wish you’d borrowed more. Well, there’s a good chance that you’ll be able to borrow more AND at a lower interest rate, too.
Not only are we a Guildford mortgage broker, but we’re also a Guildford equity release specialist that’s currently offering a complimentary review of your existing equity release mortgage deal. So, if you want out of your current deal (and/or to borrow more) then we can let you know if it’s a possibility. And, if it’s something you would like to do, we can make it happen it for you.