Early Repayment Fees (ERC) are additional charges charged by your lender for making repayments on the plan outside of any previously agreed allowances. The fees charged are designed to cover losses that the lender has incurred in repaying sooner than expected. You can pay for the capital release ahead of time. However, depending on the lender and the type of lifetime mortgage you have, early repayment fees may apply.
Some equity release providers allow you to make early repayments after a fixed number of years. Others allow you to repay a percentage of the loan each year. If you pay a lifetime mortgage early, you may have to pay an early repayment fee. These fees can be quite expensive, but before you sign up for your plan, you will have been given information about the maximum you may have to pay if you decide to repay part or all of your loan ahead of time.
The capital release can be paid in advance or you can make monthly repayments to reduce the total debt owed for the eventual sale of the property. However, it may not be that simple and any early refund charges may be excessive. If you want to move home, you may not have to pay your equity release ahead of time if your lender is a member of the Equity Release Council. When considering capital release, you may be concerned about sticking to a rigid plan for the rest of your life.
If you are considering paying the Capital Release ahead of time, you may want to ask yourself if freeing up your home equity is the right choice for you in the first place. If you want to move to a suitable alternative property with the same or higher valuation, you should be able to do so without having to pay your equity release ahead of time. All Equity Release Council lenders allow this as long as the new property meets their lending criteria. When you release principal with a lifetime mortgage and seek to repay the loan beyond the agreed terms, you may incur an early repayment fee for repaying some or all of the money you borrowed before a certain date or event.
With so many flexible options and features available that you can use to tailor your lifetime mortgage to your individual needs, it's essential that you seek expert advice before releasing capital. This is different from regular equity release schemes in which the loan and interest are returned after death, so affordability is not relevant. Therefore, like any mortgage lender, equity release providers must include a penalty for prepayment of a plan. If you're considering paying your lifetime mortgage, it pays to get advice on releasing capital to make sure you're getting the best product for your specific needs and circumstances.
It is essential that you discuss with your advisor your repayment plans with your capital release before hiring any capital release plan. The dilemma of capital release plans is that they are expensive in the long run and this significantly reduces the amount that can be transferred as an inheritance. If you earned money or inherited money yourself, you can decide to repay the capital release ahead of time so that your children receive a long-term financial benefit.