Can Equity Release Be Repaid Early?
Equity Release & Lifetime Mortgages Plan will reduce the value of your estate and can affect your eligibility for means tested benefits.
We often get asked about equity release and early repayments, which is exactly what we’re going to take a look at in this article. If you’ve had a mortgage previously, you’ll likely be familiar with the concept of early repayments (and the associated charges you often get stung with). So, is equity release the same?
Early repayments: are they possible?
In a word, yes. If you have a lifetime mortgage equity release plan, anyway. That’s the most common type, and it allows you to make early repayments if you wish. There is a catch, though: many lenders will apply an early repayment charge for the privilege.
Why do they charge you extra for repaying early? Essentially, it’s because they’ll be losing out on the interest you were expected to pay when you took out the plan. By making fewer payments, you’ll have paid the loan off earlier – and the lender will earn less. Early repayment charges are applied to counteract this.
How costly are early repayment charges?
They vary considerably from lender to lender – and depending on how much you’re repaying over what you were expected to. Every lender has their own unique set of rules and charges, so if you intend to make early payments, make sure that you study these before you take out a plan.
Why make early repayments?
The main reason why people make early repayments is to reduce their loan amount so that they can leave a greater inheritance behind for their loved ones. There are other reasons, of course, but this is the primary motive behind making payments early.
Early repayments are totally optional – a lender will never expect or require you to deviate from the terms agreed upon when you took out your equity release plan.
Northampton equity release advice
Need help deciding whether it’s worth making early repayments? Or perhaps you’re still considering taking out an equity release plan but aren’t sure whether or not it’s right for you. Whatever your situation, you can count on the advice provided by our Northampton equity release specialists. Learn more about our service today or contact us to book a free initial consultation.