Switching equity release plans is one of the most common ways that people save money. It allows you to get out of your mortgage at a lower interest rate and then use the savings to pay off your other debts. If you do it right, this strategy can save you up to twice as much in interest as you would by staying in your current home. There are several things that you will need to keep in mind when switching plans, however. Here is what you need to know if you are considering a new life plan.
First, be aware of the consequences of changing your equity releases. You may end up saving money, but your monthly payment will go up. This means that you will have to either pay more in mortgage insurance, or find some other solution to lowering your monthly payments. Some people also choose to change their coverage and lose their lifetime mortgage protection. While this may seem like a good idea, it is actually better to wait until you are well into retirement, at least compared to switching equity releases early.
Second, it is important to understand how different financial advice services work. Different financial advice companies offer different services and rates, and they can sometimes penalize you for changing plans that they already recommended. For example, switching equity release schemes early is often frowned upon by financial advice companies. They typically give you two months’ grace period to reconsider and if you do not, you face serious penalties. If you wait longer than two months, you risk losing even more money, which makes early repayment charges a serious consideration.
Finally, be very careful when considering switching equity release plans. There are certain life events that can disqualify you from a new or improved plan, such as filing bankruptcy. The two most common disqualifications are foreclosure and death. Although some life events may occur in your future that would prevent you from switching, you should consider the long-term financial consequences before agreeing to switch your existing equity release mortgage plans. Be sure that your existing plans are still worthwhile for your financial situation and stick to them.
When making the decision to switch, consider the types of rates and fees that you will be paying through the end of the term of your loan or lease. Some switching the plans include extending the term, switching from a fixed rate to a variable rate, or rolling over an existing term. The simplest way to compare different switching equity release supermarket plans is to calculate the annual cost of the new plan versus the annual cost of your existing loan or lease.
In most cases, it is the best option to stick with the same financial institution that you currently use. It is usually a good idea to consider switching equity release plans if the interest rates have dropped since you first obtained your mortgage. You may also be able to reduce your monthly payments if you are able to refinance the loan through the same bank. If this does not work, look at switching the plans to one of the other companies offering a lower rate. The rates on these plans vary greatly so you should shop around for the best option.
