Experience has shown it’s essential you review your finances regularly. Equity release schemes are no exception.
Who would have thought that 8 years ago, with essentially a handful of providers; namely Norwich Union, Northern Rock, Hodge & Mortgage Express were the only companies in the market. How times have changed!
The equity release market now has over 20 companies competing for business. This has proved a healthy scenario given the inflexibility & higher interest rates of the earlier plans & enabled such schemes to develop towards the more flexible & competitive plans they are today. But complacency must not prevail.
Competition with the equity release providers has developed new strategies of releasing equity & consequently driven interest rates lower.
It is one of these former companies; Mortgage Express that is of concern.
Customers of Mortgage Express who have equity release schemes with them have received communication over the past months detailing an interesting scenario.
Mortgage Express were one of the earlier companies to recently suffer from the credit crunch after mainly being caught out in the buy-to-let market of which they were a major player. They are a subsiduary of the Bradford & Bingley.
Due to the lending difficulties they have experienced they have now closed to new business & consequently have written to its mortgagors including holders of its equity release schemes. They are willing to release these mortgages, without penalty to a new equity release company of your choice.
For plan holders of the aforementioned it is a big decision to make as some of their schemes have interest rates as low as 5.99%, but some as high as 8%.
So would it be worth remortgaging?
The answer lies in the following factors; current property value, age, interest rate at inception & the increased balance of the equity release plan. This is where independent financial advice is essential.
Analysis can show where any break even point is. This will confirm whether there would be any benefit in transferring your Mortgage Express scheme to a new lender. Research is conducted from the whole of the market & dependent on your requirements, a recommendation can be made from a panel of over 20 companies.
Costs are an important factor in the equation as they can detract any obvious gains of moving to a lower interest rate. This is where specialist deals with lenders are of assistance, as the lower the transfer costs are, the earlier the break even point is for justifying a remortgage.
The lowest interest rate at the time of writing is 5.79% with LV=, hence for some people major savings can be made, however this rate is not available to everybody & independent advice must always be sought
By: Mark Greggs