How you could save more than £50,000 by switching your equity release plan

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OLDER homeowners could save thousands of pounds by checking if they could switch to a better equity release deal.

A growing number of people are using equity release to free up the cash they own in their home.

Equity release is available to those aged 55 or over, and lets you access cash you hold through the value of your property.

It’s like a mortgage because it’s a loan secured against your home. But the key difference is you won’t have to make monthly repayments.

Instead the interest on the loan is rolled up, and paid off either when you move into care or when you die.

Borrowers can take out as little as £10,000, but depending on how much your home is worth and the plan you choose, you could get considerably more – as much as 58% of the value of your property.

The money is tax-free too, so you don’t have to worry about a bill from HMRC.

As house prices rise and people live longer in retirement, equity release is getting more popular.

According to the Equity Release Council, more than 23,000 homeowners took out an equity release plan in the first three months of the year.

These borrowers took out an average of £94,000 from their home.

But even if you already have an equity release plan, you could save tens of thousands of pounds.

Like standard mortgages, you can switch your equity release loan to a better deal.

What you need to know about switching your equity release plan

Interest rates are rising, and that could mean homeowners should consider acting soon to lock in the best deals.

Andrew Morris, senior equity release adviser at Age Partnership, said: “Anyone who is thinking about switching their old plan should act now and have their free review to get ahead of the rise in rates.”

In 2016, the average interest rate on equity release plans was 6.15%.

Today they are much lower at 4.33%

But as the Bank of England has been hiking interest rates, mortgage rates are set to increase too.

Morris said: “Equity release plans are also much more flexible than they were in years gone by, so the added benefit for anyone thinking about switching is that they have much more control over the loan than they once will have done.”

Flexible equity release options

As well as cheaper deals, equity release borrowers have far more options than they used to.

According to Moneyfacts, there are 665 different equity release plans now available, compared to just 66 in 2016.

Plans that meet the standards set by trade body the Equity Release Council now have to allow voluntary repayments, which can help to stop your debt from growing further.

Some deals also now let borrowers withdraw their money in chunks, rather than taking the full amount at once.

That can save you money as you only pay interest on the cash you have accessed.

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