Many people may regard equity release as a once only event.
“I’ve raised the money I wanted, it will be repaid when the house is sold.”
However, this shouldn’t necessarily be the case. Just like a normal mortgage, lifetime mortgages should be reviewed from time to time to see if savings can be made.
Lifetime mortgages in the early part of the century had interest rates around the 8% mark.
New plans, despite recent increases, can still be found at 6.59%.
The savings can be tens of thousands. Let’s look at an example –
William and Mary are 75 years old and owe £100,000 on their lifetime mortgage with an interest rate of 7.99%.
If they remortgage to a lower rate, after allowing for £1,500 in total fees, the amount owing after 15 years would be £264,370.
|
After 10 years |
After 15 years |
After 20 years |
£100,000 at 7.99% |
£215,693 |
£316,777 |
£465,233 |
£101,500 at 6.59% |
£192,146 |
£264,370 |
£363,744 |
Saving |
£23,547 |
£52,406 |
£101,490 |
That’s a saving of over £52,000 and the more time goes one, the greater the savings.
David Wright
Managing Director, Sixty Plus
6 January 2010
