Equity release plans with reserve facilities can be an excellent way to access further funds as you need them. You do not need further financial or legal advice, and the lender will be able to use the original property valuation.
To access your reserve facility you need to call your equity release lender directly who will send you a mortgage offer for the funds. Once the signed offer acceptance is returned, the lender will release the drawdown funds directly into your bank account. The whole process usually takes around two weeks.
If you want to drawdown from a reserve facility on an existing lifetime mortgage you should contact your lender directly to request the funds.
Once you have received your new mortgage offer, I recommend that you speak with an equity release advisor to make sure that it is the most cost effective way for you to proceed.
There may be other options available to you which your lender will not discuss with you. You can call us on 0207 158 0881 to discuss your options.
When accessing an equity release reserve facility you do not need to draw all of the funds at once. Most plans have a minimum drawdown amount between £2,000 and £5,000.
Aviva have recently updated their terms which allow customers to draw a minimum of £500.
You can check your original lifetime mortgage offer to find out the minimum amount that you can drawdown. Alternatively, you can check with your lifetime mortgage lender the minimum amount that you can drawdown.
When you drawdown from your equity release reserve facility the lender will send you a new mortgage offer. The new offer will form a sub-mortgage to the original loan. This may sound complicated, but it is quite straightforward.
Each time you draw down on an equity release a new mortgage offer is made that sits standalone to the original equity release. It will have its own interest rate and its own set of early repayment charges. The original equity release (and any previous drawdowns) terms remain unchanged, including their interest rate.
Drawdown equity release interest rates are all set to the prevailing rate at the time of the drawdown. This means that you may have a higher or lower interest rate associated to the additional equity release funds depending on whether interest rates have increased or decreased.
Equity release interest rates have steadily decreased over recent years and you may find that you are able to achieve a lower interest rate now than before.
Because equity release interest rates have generally fallen, it could also be sensible to consider replacing your entire lifetime mortgage with a new one. By doing so you will be able to make benefit of the lower interest rate over the entire loan amount.
For this reason we always recommend that you speak with an equity release advisor before accepting a drawdown offer.
There shouldn't be any additional charges levied by the lender when accessing your reserve facility. The reserve facility was agreed upon when the plan was originally set up. The lender will use the original property valuation and you are not required to receive any additional financial or legal advice.
You may have found that the interest rate on the initial borrowing was slightly higher than that of a lump sum for the similar amount. This allows the lender to recoup some of their cost for holding the funds in reserve for you.
Remember though, reserve facilities are not guaranteed. If property prices crash, or the equity release provider stops lending, you may find that subsequent drawdowns are refused. If this happans you should speak with an equity release advisor to see if it is possible to replace your existing plan with a new one to allow you access to additional funds.
Although you can contact your equity release lender and drawdown the additional funds directly, I always recommend that you speak with an equity release advisor to ensure that it is the most cost effective way for you to proceed.
Of recent plans reviewed, it has more often than not, been more cost effective to replace the entire equity release plan with a new one.
Becuase equity release interest rates have continued to fall, you can now make benefit of a reduced interest rate on the entire loan amount.
It can also be a great time to explore other features which may be good for you to add to a new plan too, including:
- A new reserve facility
- Downsizing protection
- Significant life event exemption
- Optional repayments
I have written an entire article dedicated to how existing equity release clients can save money which you may wish to read for further detail.
Alternatively, contact us to explore your drawdown options in greater detail.
If you have further questions, why not speak with one of our qualified advisors?
Call us on 0207 158 0881 or use our online form to book your FREE consultation.
While a qualified equity release advisor has written this guide, it is not intended to be used as financial nor legal advice and should not be relied upon.
To understand the full features and risks of an Equity Release plan, ask for a personalised illustration.
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