When starting a new Equity release plan borrowers accept that this will be with them for the long term. It’s a convenient way to access some tax free cash from your home, allowing you to still live there for the rest of your life.
But are you able to do equity release more than once?
Is it possible to take out another plan and release more equity? Read on as we will answer both of these questions and more.
Equity release explained
Equity release comes in two basic forms:
- Lifetime mortgage
- Home reversion
Both are regulated by the Financial Conduct Authority and allow homeowners over the age of 55 to tap in to the equity in their home.
You can’t have all of the equity though, but older borrowers do get to borrow a bit more.
In this article we will concentrate on lifetime mortgages, which as the name suggests, is a type of Mortgage.
You can read more on how equity release plans work here.
What is a Lifetime Mortgage?
A lifetime mortgage is a type of equity release that allows homeowners to access the equity in their home via a mortgage. The amount available will depend on your age and the value of your home (which must be your main residence).
Although mortgage interest is charged, this is usually at a fixed interest rate and no monthly payments are expected by the lender.
Instead the interest is added to the money you originally borrowed.
This type of later life mortgage is highly regulated and you will always need to receive financial advice before being able to release equity.
Can you do equity release more than once?
It is possible to use equity release to release cash from your home more than once.
But you can’t have two lifetime mortgages, at the same time, on the same property.
In the next section we cover the different ways you can take out an equity release plan twice.
Equity Release Advice
Award winning service
Equity release experts
FCA Regulated
Let us match you with a fully qualified equity release expert.
Call us on 0330 030 5050
Further advance
A further advance involves going back to your lifetime mortgage provider and asking if they would lend you some more money.
There are a few schemes that have a drawdown facility built-in, and we cover these mortgages next.
But if you don’t have a drawdown option then a further advance is a good place to start.
These scenarios could boost what you might be able to borrow:
- As you are now older you could be eligible for a higher loan to value percentage
- You may not have originally released the maximum amount
- Your home may have increased in value
You will need to get advice from a specialist equity release adviser, and the lender will want your home re-valued.
Drawdown lifetime mortgage
According to the Equity Release Council more than half of equity release customers choose to include a drawdown facility.
When you first apply to the lender they will work out the maximum that you can borrow.
You can then take an initial lump sum, but not the maximum, along with the opportunity to access further money at a later stage.
By using the drawdown option, the amount of interest that you pay is reduced because you only take what you need.
The savings in interest charges can be significant over a number of years but there are other advantages:
Property valuation: As your credit facility is pre-agreed you won’t need to have your home revalued as long as you stay within the limits.
Financial advice: You still need to receive advice when first taking out your drawdown lifetime mortgage, but there is no requirement for it when you wish to access further money from your pre-agreed facility.
Lifetime mortgage re-mortgage
The other option is to switch your lifetime mortgage over to a new lender. This is very similar to getting a standard remortgage on your property.
By moving lender you could get the opportunity to borrow a bit more money.
But you might also get some added extras, as equity release plans have changed a lot over the years. If you took out your plan a long time ago it’s likely to be less flexible than the current schemes.
The process starts by speaking to an equity release adviser. They will look at your current arrangement and then compare it to some new plans, from different companies.
It’s important to look carefully at the fees and charges involved in switching, even if the new plan looks much better and has a cheaper interest rate.
The new lifetime mortgage must pay off the old one completely (remember you can’t have two plans on the same house).
Which is the best option?
It’s natural to wonder whether a further advance, using a drawdown facility, or remortgaging is the absolute “best” way to access more equity.
The truth is, the right answer depends entirely on your unique situation.
Let’s consider a few of the important factors:
Your Current Plan
If you have an existing equity release plan, its terms will significantly influence your options. Do you have a drawdown facility built-in? Would switching to another provider mean facing hefty early repayment penalties?
Property Value Changes
If your home’s value has gone up since you first released equity, that’s great news! You might be eligible to access a larger sum regardless of which option you choose.
Your Financial Needs
How much extra money do you need, and do you think you might require more in the future? Your specific goals will help determine which approach feels the most comfortable and practical.
What Matters Most to You
Do you want to minimise interest charges as much as possible? Are you concerned about the potential impact on what you can leave your loved ones? Your individual priorities will shape which option feels right for you.
Why would you want to do equity release twice?
Sometimes, even with the best planning, life takes unexpected turns.
Maybe you took out equity release a few years back to cover some unforeseen costs, but now you’d like to make those long-awaited home improvements or help out a loved one.
Here are a few common reasons why people consider accessing a bit more equity:
- Your Needs Have Changed: Life has a way of throwing curveballs. Things might look different now than when you initially released equity. Perhaps you need extra funds for a new hobby, an accessible bathroom, or to lend a hand to family.
- Your Home’s Value May Have Increased: If the housing market has been on the rise, your home could be worth more than before. This means you might be able to release additional equity if needed.
- You Have a Drawdown Plan: If your original equity release plan includes a drawdown facility, you’re in luck! This means you can access more cash as needed without the hassle of extra paperwork or valuations.
- New Possibilities with Newer Plans: Remember, equity release plans have gotten better over time. If you took out your plan a while back, switching to a more modern option could potentially mean access to more funds and possibly even a better interest rate.
Talk to an adviser
Figuring out if it’s right to release more equity from your home can be tricky.
A qualified equity release adviser is there to help!
They can:
- Explain Everything Clearly: Plans can have confusing details. An adviser will break it all down for you in simple terms.
- Find the Best Option: Should you consider a further advance, drawdown, or perhaps switch plans altogether? An adviser will look at your specific situation and help you figure out the best approach.
- Think About the Long Term: Accessing more equity now could affect what you leave behind. An adviser can help you weigh the pros and cons and make plans with your loved ones in mind.
Getting professional advice ensures you make the most informed choices about your financial future, and you can’t take out an equity release plan without it!
We can help you find a whole-of-market equity release specialist.
FREE matching service
Call us on
0330 030 5050
What is a gifted deposit?
Many equity release borrowers give some or all of the money to their children to use as a deposit for a house. The lenders call this a gifted deposit. Read on as we explain how gifted deposits work and how lenders feel about them.
Also in this section
Equity Release Hub
Equity Release
Alternatives to equity release
Am I Eligible for Equity Release?
Benefits of Equity Release
Equity Release Guide
How Does Equity Release Work?
Things to Consider Before Taking Equity Release
What is Equity Release?
This post first appeared on Respect Mortgages - Be In The Know, please read the originial post: here
