Can I Repay an Equity Release Loan Early

The short answer is yes. The trouble with short answers is that they are short, especially on detail!

Equity Release plans are designed to last for your lifetime and as such they are not meant to be repaid early. However, it is generally acknowledged that sometimes this is what the borrower wishes to do and therefore a facility to do so is usually put in the terms and conditions.

Video courtesy of Dennis Perry at The Right Equity Release.
Penalties

Early repayment penalties are the key to whether or not repaying the loan early is a good idea. Such penalties are set out clearly in the contract and if you are in any way unsure of them, you can, and should, talk to the Equity Release provider or your solicitor. Ideally, you should go back to the equity Release adviser who arranged the plan for you and go through the consequences of early repayment in fine detail.

It is a very bad idea to just go ahead and repay the loan early without taking advice. It could cost you more than you realise in fees!

Generally, there are two reasons for repaying early. The first is an unexpected windfall or inheritance and the second is downsizing to a smaller house. In both cases you need to take advice before you do anything, but especially when downsizing you need to speak to your Equity Release provider right from the point when you start considering the idea.

When you first took out your plan, the amount of money you borrowed was dependent on your age and the value of the property among other things. You will be certainly older when you downsize and, in most but not all cases, the value of your new property will be lower. Unless you have a Home Reversion plan, your equity release plan will allow you to move, however it will be a new loan, with new limits and possibly, if the terms and conditions have changed on the product, new interest rates and other conditions. It may be that you are better off looking at a new provider entirely. Remember, any fees associated with the alteration of, or any repayment of, the Equity release plan will be in addition to all the normal costs associated with moving house. You need to do your figures very carefully before you make such a big commitment.

NEXT: Can I Move House If I Have An Equity release Plan?
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