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Best Equity Release interest rates

The Equity Release plan with the lowest rate might not actually be the best deal

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What are the best Interest Rates you can find for Equity Release?

Interest rates on Equity Release loans are usually fixed or sometimes capped, but if you browse the market you’ll notice quite a difference in rates between various providers and schemes.

You might think that a deal with a lower rate should be the one to go for, but scratch beneath the surface and you will find each product has conditions and benefits that affect how much you pay in the long run. Will the lower-rate deal really give the best value for money? And will your property even be eligible? You’ll need us to do some research.

What you should look for with Equity Release interest rate

As you would expect from any cheaper products, Equity Release schemes with the lowest interest rate do not offer many, if any, additional benefits. However, you will notice that as the interest rate rises, the providers will offer more up-front incentives to take the loan. These could be things like:

  • Free property valuation
  • Free or very low application fees
  • Cashback option – sometimes 2%
  • Downsizing protection
  • Inheritance protection
  • Medical underwriting option

Depending on how long you think the life of the loan will be, a higher interest rate product might work out to be the better-value option. A 6.24% rate might sound a bit steep, but what if the lender guarantees a higher value-to-loan ratio and a favourable drawdown period?

Other incentives that might influence your decision

Each of the below added extras could change how you think about a prospective deal, and save you money.

Repayment options

Equity Release providers used to impose strict charges for repayment, early or otherwise, but many have responded to customer needs and are now more flexible. If you want to have more control over your loan, and how much remains payable when it comes due, some lenders now let you pay back 10% annually without a penalty.

More favourable repayment charges

Also on the subject of early repayment, many Equity Release schemes with a higher interest rate feature a simple fixed repayment charge or will only charge you a certain percentage during certain time periods. For example, they might impose a 5% charge to repay the loan within the first five years, then 3% during the following three years, and no charge thereafter. This means if you wanted to repay the loan after 8 years, you could do so without charge, instead of being locked in.

Lower withdrawal increments

If you want to be careful with your finances, and take sums out of an Equity Release pot in smaller stages, then you might want to go for a deal with a higher rate. Remember, with ‘drawdown’ schemes, you only pay interest on the amount you withdraw.

This is a case of the provider striking a balance. Many drawdown schemes with a low interest rate will stipulate a high minimum withdrawal, so you would take larger sums perhaps less often.

Some schemes with a higher interest rate will allow you to take as little as £2000 at a time, which might be beneficial if you are trying to keep within a savings threshold to remain eligible for certain means-tested benefits.

Also bear in mind:

The availability of favourable interest rates will also vary according to the size of the loan, the value of your house and also, in some cases, your location.

Making your decision easier

There are a huge amount of Equity Release schemes on the market, and going through them all trying to find the one that matches your needs can be a confusing and exhausting task. This is why it’s worth approaching an independent financial adviser or Equity Release broker to get them to help you.

As well as being experts on Equity Release providers and schemes, they may also have access to exclusive deals that don’t feature on a lender’s website. Which options we think could work well for you will depend on how much you need, spread over what period of time. The key factor to understanding how the interest rates and charges will affect you is knowing how you want to use your money and when.

As members of the Equity Release Council, our priority is to put your interests first.  When we get our calculators out on your behalf, we want you to feel confident you are being treated fairly at every step.

To sum up…

It’s a matter of doing some maths. If looking at a short term plan, you might prefer to pay less fees up front in return for a higher interest rate. If going for a long term loan, you might prefer to pay more up-front costs for a scheme that offers a lower rate over a longer period.

Which is the best interest rate for you? In the end, only your adviser can really tell you.

Equity Release Calculator

Calculation results should not be considered as a quote. Make sure you read the separate Key Facts Illustration (KFI) or European Standard Information Sheet (ESIS) before making a decision

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