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HOW MUCH DOES EQUITY RELEASE COST?
Learn about the costs involved in releasing equity from your home, as well as considering the impact on your future finances.
On this page you’ll find out
- The fees which are involved with later life lending
- Understanding when interest will apply and when your outstanding balance is required to be repaid
- Other financial considerations involved in equity release
The Costs of Equity Release
Equity release can provide you with the financial flexibility you need, but it’s essential to understand the costs involved. From advice and solicitor fees to potential interest and early repayment charges, the costs of equity release can add up over time. Always speak with a qualified adviser to ensure you fully understand the costs and implications before deciding whether to proceed.
Below, we break down the key costs you should consider when thinking about equity release.
The Advice Fee
One cost of equity release is the advice fee. Before you can proceed with any equity release product, it’s essential to seek advice from a qualified equity release adviser. This is because equity release is a significant financial decision, and a qualified adviser will help you understand whether it’s the right option for you.
We offer an initial appointment and recommendation for free. This means you can find out whether you’re eligible and if you’re comfortable with the pros and cons of equity release. Only if your case completes would you pay the advice fee of £1,695.
This fee covers the cost of researching the most suitable product for your need, explaining the options available, and helping you through the application process. This ensures that you are fully informed and have professional guidance when making this important decision. We’re with you every step of the way
Solicitor’s Fees
Another cost to consider is the solicitor’s fee. As part of the equity release process, you’ll need to seek legal advice before agreeing to the terms of the contract. This is required by law to ensure that you fully understand the implications of the agreement, and also covers any searches, conveyancing, disbursements, and VAT.
It’s essential to work with an experienced solicitor familiar with equity release to ensure that all legal aspects are fully covered. We can recommend a solicitor, but you’re free to choose your own.
Lender Fee (Set-up Costs)
In some cases, when taking out an equity release plan, there may be a set-up fee charged by the lender. This fee covers administrative costs such as processing your application, valuing your property, and setting up the plan. It is important to note that this fee can vary depending on the lender and the specific plan you choose.
Interest – The Cost of the Plan
Depending on the type of plan you choose, one of the biggest ongoing costs could be the interest charged.
With a lifetime mortgage, you’re borrowing money against your home, and this is subject to interest which will compound. This means that each year, any interest not repaid is added to the total amount you owe, and the interest will continue to accrue on the increasing balance. The loan, plus any interest that has accrued, will be paid when you move into long-term care or pass away. You can choose to make repayments to the lifetime mortgage, subject to lenders limits and criteria.
Lifetime mortgages give you the option to repay the interest, which can reduce the overall cost of the loan over the lifetime of the plan. By servicing the interest, the amount you owe doesn’t grow over time in the same way it would with a rolled-up interest plan. This means more of the value of your home can be passed on to your beneficiaries in the future. You have the flexibility of making payments if and when you choose, however, if the interest isn’t repaid, it will be added to the loan and the balance will increase each year. Early repayment charges may apply above a set value.
With a home reversion plan, there’s no interest charged because you’re not borrowing money, you’re selling a portion or all of your home to the provider in exchange for a lump sum or regular payments. This means the provider will benefit from any increase in the property’s value over time. When your home is eventually sold, the provider receives their share of the sale proceeds, and anything remaining goes to your estate.
The interest rate for lifetime mortgage plans can vary and is tailored to your individual circumstances. Therefore, we cannot give you a specific rate without conducting a factfind with an adviser. The interest rate you receive is typically fixed for the life of the loan, which can provide you with some certainty about the total cost of borrowing over time.
Other Charges
In addition to the costs mentioned above, there are a few additional charges that may apply when taking out equity release. These include:
- Early Repayment Charges (ERCs): If you want to repay the money released earlier than expected, you may be subject to early repayment charges (ERCs). The amount of the early repayment charge will depend on the lender and the type of equity release plan you choose. It’s important to check if your plan includes ERCs and understand how they could impact your decision if you need to repay the outstanding balance sooner than expected.
- Maintenance to Keep the Property in Good Condition: To keep your equity release plan in good standing, your property must remain in a reasonable condition. Lenders may request regular property inspections to ensure the home is properly maintained. If the property is damaged or poorly maintained, the lender may ask you to carry out repairs or make changes.
While there may not be an immediate cost associated with this, it’s essential to consider that you’ll be responsible for maintaining your property throughout the term of the plan.
Financial Considerations
Before deciding if equity release is right for you, it’s essential to weigh up the impact it will have on your future finances. Here are some key considerations:
- Impact on the Estate and How Much You’ll Leave to Beneficiaries
One of the most significant impacts of equity release is that it reduces the value of your estate and could impact funding long term care. Any money you release from your home (and any accrued interest) will need to be repaid when you move into long-term care or pass away. This will usually be repaid through the sale of your property, meaning there will be less to pass on to your beneficiaries.
It’s recommended that you discuss your plans with your family and beneficiaries to ensure everyone understands the potential impact on your estate. - The Loss of Any Means-Tested Benefits, Either Now or in the Future
Equity release may affect your eligibility for means-tested benefits. While the money you release is tax-free, it could increase your total savings or assets, making you ineligible for certain benefits now or in the future.
It’s essential to speak with your adviser about how equity release might impact your entitlement to benefits and whether it could affect your financial situation down the line.
Equity release may involve a home reversion plan or a lifetime mortgage, which is secured against your property and will reduce the value of your estate and impact funding long-term care.
Equity release requires paying off any existing mortgage. Any money released, plus accrued interest would be repaid upon death, or moving into long-term care.
Advice is required to proceed with equity release and there may be other options which better suit your circumstances. We provide initial advice for free and without obligation. Only if your case completes would our advice fee of £1,695 be payable. Other lender and solicitor fees may apply.
FIND AN ADVISER
Find your local adviser or speak to one over the phone.
Our advisers are happy to help you, wherever in the UK you are, and guide you through your equity release options with a personal, no-obligation consultation.
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Why people release equity?
Understand the many reasons why people release equity from their homes to help you decide if it’s right option for you and your circumstances.
How to Apply
Find out more about the application process, the conversations you will have with you adviser and the step-by-step process.
Frequently asked questions
We’ve compiled some of the most frequently asked questions, to help you understand if equity release is right for you.
Things to consider
There are certain things you should consider before making a decision about whether equity release is right for you and your circumstance.
REQUEST A FREE GUIDE
Read more about Equity Release whenever you have a quiet moment.
We’ve put together a free guide packed with information and answers to the most frequent questions about equity release.
You can download an online version right away or we can post a copy to your home.
