Can I Pay Off Equity Release Early?

Malcolm

Today we're talking about all things equity release. So one of the questions that we get from time to time is about paying off equity release early, Dan.

So do you want to expand a bit on that for some of our viewers?

Dan

Yes. Certainly. It's something that does come up for a lot of people.

They've been used to paying off mortgages for the whole of their lives and they want to carry on looking at doing that with equity release.

The short answer is you can pay it off whenever you like, but penalties may apply depending on when you do it and how much you pay off.

Most lenders have facilities in place for you to over pay by up to ten percent each year.

There are certain terms and conditions by ending things, but you can certainly make over payments.

Now there are certain products coming into the market now that recognise that people maybe want to pay things off faster.

And there's 20 and even 40% annual overpayments available in the market, although you do tend to pay a slightly higher rate to get those.

Malcolm

I mean, that 10% facility to overpay is something that's pretty standard in the normal mortgage market as well.

What sort of occurred to me with this question is, one would associate equity release sometimes for applicants who are looking to raise money when they've got no other ways to do it.

So I was curious as to how or why an applicant might want to make these overpayments or make an effort into paying the money back?

Dan

Well, if you don't make a payment towards equity release, you've got to accept the effects of compound interest.

And a lot of people, although they may need a lump sum of money, may have enough income to at least pay the interest.

And that can be done on a monthly direct debit, it can be done on a completely ad hoc basis.

So people can phone up with a with a debit card and pay as and when they can afford to.

So if some people prefer to deal with their bills and everything weekly, as long as we know that at the start, there are lenders out there who will allow you to pay £50 a week.

Malcolm

And just protecting some of the future inheritance,

I suppose if you got a perhaps a younger applicant, someone in their late fifties or sixties, then they might be due an inheritance of their own.

Dan

Certainly. Certainly. And if we, I mean, never want to a time scale on an inheritance, but it may be a maturing endowment policy, something like that. As long as we know that at the start.

We can plan a product that has penalties that are more likely to fit in with with the life events that are coming.

So, I mean, in terms of the younger borrowers particularly, it's not always about income.

Maybe they've had an interest-only mortgage that the lender won't extend the term on, they haven't managed to save enough to pay it off or they've had an endowment that's failed.

I mean, we've all come across those on a fairly regular basis.

So it may still be their intention to pay off the mortgage and equity release for a lifetime mortgage can give them the time and flexibility to do that in a way that it's not going to disadvantage them financially.

Malcolm

Good. Thanks, Dan.

Dan

Thank you.