For all equity release plans, repayment is due after the last borrower dies or enters long-term care. But if your needs change, what options do you have to pay off a plan early?
Yes, you can. With lifetime mortgages that meet the standards of the Equity Release Council, you can choose to repay all or some of the loan early. But charges may apply.
Most providers will allow you to make partial repayments without any charges. This tends to be up to 10% of the loan amount each year.
This depends if you have a lifetime mortgage (a loan secured against your home), or a home reversion plan.
Lifetime mortgage: With some plans, you could pay some or all the monthly interest. You may also be able to pay back more than the total interest amount. This reduces the capital you owe. If you want to pay back the full amount, or were to pay back more than is allowed, there might be early repayment charges.
The Saga Lifetime Mortgage, provided by Just, offers you the choice to pay all or part of your monthly interest. This reduces the overall cost of the lifetime mortgage loan. You may also benefit from a lower compound interest rate.
Home Reversion Plans: You will need to buy back the portion of your house that's sold to the provider. This is likely to cost you more than the provider paid for the share, because of market changes, and because the provider would've brought the share of the property below market value.
You may need to pay early repayment charges (ERCs) to a provider when you pay back a lifetime mortgage early or if you pay back more than is allowed. These charges are to recover costs and losses for the provider.
ERC costs vary between providers and products. You can find out more by checking your documents or by asking your provider. Types of ERCs include:
Fixed-rate ERC: You know exactly how much it will cost to repay early.
Variable-rate ERC: Costs may vary and are a percentage of the initial loan.
Initial borrowing vs. balance: Some providers work out ERCs on the initial loan, others on the remaining balance. This means charges can vary quite a lot.
When you take out equity release, make sure you know all the facts. This includes how ERCs work for your plan.
With a lifetime mortgage, there are no ERCs when the plan ends after the last borrower dies or enters long-term care. Other reasons why ERCs may not apply include:
Overpayments: Some providers will allow you to overpay or partially repay the loan. For example, up to 10% each year.
Moving your plan to a new property: Depending on your provider and the new property value, you may not have to pay back your loan in full. Your provider will need to approve the move of the plan. They may request that some of the loan is repaid.
Downsizing protection: You could pay back your loan without penalty if you move to a smaller property and no longer need the equity release.
Significant events: With a joint equity release plan, you could repay the loan without ERCs when the first borrower dies or enters long-term care.
ERC exemption options vary between providers. If an ERC doesn't apply, pro-rata interest will still be due up to the early repayment date. That’s unless there are special interest-free period guarantees.
The Saga Lifetime Mortgage, provided by Just, comes with a Money Back Guarantee. If within six months of completion, you decide you no longer need the money borrowed, you can repay it without any interest or ERCs being applied. You can read more about eligibility in the terms and conditions. For example, your initial advance can’t be over £150,000. A lifetime mortgage is a loan secured against your home, Equity release will reduce the value of your estate.
If you want to find out more about equity release and ERCs, book a no-obligation appointment or request a callback from the Saga Equity Release team.
We partner with HUB Financial Solutions Limited to provide Saga Equity Release. This no-obligation, no-pressure service could help you find out if equity release is right for you. There's an advice fee of £799 if you take out a Saga Lifetime Mortgage.
Chat to an expert and find out if equity release is right for you. Or request a callback at a time that suits you.
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