Fact 13: The interest rate is usually fixed for life
When you take out an equity release plan, the interest rate is usually fixed for life. This means that with a lump sum lifetime mortgage where you take a single cash release, the rate set at the beginning of the loan remains the same throughout the loan period.
Things work slightly differently with a drawdown lifetime mortgage. With these plans, you take an initial lump sum, and then draw additional cash instalments over time. Here, you would pay a different interest rate on each instalment, depending on the lender’s interest rate at the time of each withdrawal.
Some plans do however feature variable interest rates, similar to traditional ‘tracker’ mortgages. To give you some protection against rising interest rates, these plans typically feature a ‘cap’ so that the interest rate won’t go higher than a predetermined level.
Fact 14: Having an equity release plan doesn’t stop you from moving house
Now it’s time for another equity release fact that may surprise you. As long as your new home meets your provider’s criteria, you will be able to move house and take your equity release plan with you.
Equity release providers recognise that many people in retirement decide to downsize or move closer to family. What’s more, Equity Release Council approved plans all feature the right to move house. Our selected equity release advisers can of course provide you with more information about this.
Fact 15: You won’t leave a debt to your loved ones
One of the most reassuring facts about equity release is that all plans that meet Equity Release Council Product Standards come with a ‘no negative equity guarantee’. This means that you or your estate will never owe more than the property is worth when it’s sold after you pass away or move into long-term care.
Even with this guarantee, releasing equity is likely to reduce the value of your estate. This equity release information may therefore be something to discuss with your family members when considering equity release.