Switching Equity Release Provider: Find the Cheapest Option

Are you curious about switching equity release providers? Perhaps you’re wondering if you could benefit from a lower interest rate or extra assurances. You’re in the right place to learn all about it. 

Every month, more than 7,000 people visit our website to understand equity release better. You’re not alone.

In this article, we’ll explain:

•  A quick recap on what equity release is
•  How to spot red flags in equity release companies
•  How to get a realistic quote
•  The benefits and drawbacks of changing your equity release provider
•  Which company is the best in the UK for equity release in 2023

We understand that the fear of debt and the confusion about how equity release works can be scary. But, we’re here to help. 

Ready to learn more about how to make the best choice for you when it comes to equity release? Let’s get started!

Can you switch providers?

Yes, it’s possible for some homeowners to switch their equity release plan for a different one, either with the same or a different equity release company. This is comparable to swapping your residential mortgage for a different one, i.e. remortgaging. 

Switching equity release providers is sometimes referred to as re-equity release. It’s not the same as moving home and taking your current equity release plan with you, which is known as equity release porting. 

What are the benefits?

The main benefit of switching equity release providers is to secure a lower interest rate. 

If you can swap your lifetime mortgage for a different lifetime mortgage with a lower interest rate, the debt amount will grow at a slower rate, which could increase the value of the inheritance you pass on to loved ones.

This has been a question asked scores of times, especially on popular UK forums:

Source: https://forums.moneysavingexpert.com/discussion/5122521/switching-equity-release-providers 

But you might swap equity release providers for other reasons. You could wish to swap an older lifetime mortgage for a more modern plan which offers additional assurances and benefits, such as a downsizing clause. 

This is a clause which allows you to downsize to a less valuable property and pay off some of your loan – but you won’t be stung by hefty early repayment charges. 

How do I change my plan?

The first step in switching equity release plans is to speak with an equity release financial adviser and broker. They will assess your specific situation to explain why changing lifetime mortgages may or may not be right for you. 

Once you have chosen a new equity release provider, the following process should be followed:

1. Explore various equity release providers, comparing plans, interest rates, and features.
2. Understand all costs involved, such as early repayment charges, application fees, and adviser charges.
3. Collate all necessary documents, such as identification, property documents, and details of the existing plan.
4. Your new provider will arrange a property valuation to determine its current market value.
5. : Thoroughly review the new contract with your solicitor, ensuring all terms and conditions are understood and favourable.
6. Notify your existing provider about the intended switch, adhering to any notice periods if applicable.
7. Ensure all details of the new plan, such as interest rates and repayment structures, are as agreed upon.

What are the drawbacks?

The downside of changing equity release providers is that you could have to pay an early repayment charge. This charge will be owed to the current equity release lender as compensation for exiting the agreement early. 

Equity release early repayment charges are known to be expensive, but they aren’t always so costly. Lifetime mortgages will either use:

1. Variable rate early repayment costs
2. Fixed rate early repayment costs

The variable rate will be applied to the outstanding loan amount and is based on Gilt yields, which are a type of British Government Bond. Fixed rates are also applied to the outstanding loan amount, but they are fixed based on how long you’ve held the lifetime mortgage. 

If you’ve held your lifetime mortgage for over eight years, depending on the agreement, you might not have to pay an early repayment cost at all

The other drawback is that you may have to pay further fees to arrange and secure the new equity release plan.

How long does a transfer take?

If you’re moving home and taking your equity release plan with you, it will usually take a couple of weeks.

The full equity release application timescale and essential steps have been outlined in this MoneyNerd guide.

Which is the best equity release company in the UK?

There is no single best equity release company in the UK. That’s because equity release plans should be selected based on personal needs and future plans. One plan might be the most suitable for one person, but it may not be ideal for another.

For example, you might have plans to downsize in the future and are prepared to pay a slightly higher interest rate if it means you can downsize without paying early repayment costs. Another person might not have downsizing plans and would prefer the slightly lower rate of interest. 

This is why you need equity release advice first!

What does Martin Lewis say about equity release?

Martin Lewis has been on record to say that he warns against using a lifetime mortgage or home reversion plan, but they may be the best option for some homeowners in specific circumstances. 

He takes a cautious approach to them, knowing how expensive they can become. For example, with a lifetime mortgage, you can usually expect the debt to double after holding the lifetime mortgage for around ten years.

Can I transfer to another provider? (Quick summary)

Yes, it’s possible to transfer a lifetime mortgage for another lifetime mortgage, but you may have to pay an early repayment charge and further process costs. You should factor these fees in when working out if a re-equity release is worth it.

Things to consider

Equity release will involve a home reversion or a lifetime mortgage, which is secured against your property and will reduce the value of your estate and impact funding long-term care. Our equity release partner, Age Partnership provides a personalised illustration to explain the full details. The money you release, plus the accrued interest is then repaid when you die or move into long-term care. Advice is required before proceeding with equity release and any existing mortgage must be repaid. Age Partnership provide initial advice for free and without obligation. Only if your case completes would Age Partnership’s advice fee of £1,895 be payable. Other lender and solicitor fees may apply.