What we cover in this guide
- Try our Equity Release Calculator
- What are the best interest rates you can find for Equity Release?
- What should you look for with Equity Release interest rates?
- Other incentives that might influence your decision
- What influences the availability of favourable Equity Release interest rates?
- How is Equity Release interest paid back?
- How much will Equity Release cost?
- Making your Equity Release decision easier
- Frequently asked questions
What are the best interest rates for Equity Release?
Typical Equity Release interest rates can range anywhere between 5% and 6.5%.
However, there is not a ‘best’ Equity Release rate to aim for or for a lender to use. This is because each application is different, and everyone will be suited to different lenders.
So, someone else getting a favourable rate doesn’t necessarily mean that you will, too. Furthermore, the product they get may not suit your personal circumstances. This is a key thing to remember when looking for any type of mortgage deal.
Though might think that a deal with a lower rate should be the one to go for, you’ll find that 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?
Other incentives that might influence your decision
Equity Release providers used to impose strict repayment charges. Now, however, many have responded to customer needs and are more flexible.
There are ways to have more control over your loan, and how much remains payable when it is due. If you find the right lender, some will let you pay back 10% annually without a penalty.
More favourable repayment charges
Furthermore, regarding early repayment, many higher interest schemes feature a simple fixed repayment charge. Some 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. This will then change to 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 take out sums 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, perhaps, take larger sums less often.
Some schemes with a higher interest rate will allow you to take as little as £2,000 at a time. This could help you stay under a savings limit to remain eligible for means-tested benefits.
Frequently asked questions
- What costs are involved with Equity Release?
- Is Equity Release taxed?
- What is a drawdown scheme?
There are a variety of costs involved when looking to take out an Equity Release plan:
- Valuation fees
- Arrangement fees
- Solicitors’ fees
- Consultation fees (certain brokers offer these – we don’t!)
- Interest rates
If you want a more detailed insight into the costs of Equity Release, you can read our in-depth guide.
The capital released from your property is not taxed, making it an effective way to raise capital. This is because it’s technically not income, and, as you’re borrowing, you don’t pay capital gains tax.
Are you looking to release equity from your property? Reach out today and we will pair you with one of our expert advisers. They can answer any questions you have during a free no-obligation consultation.
A drawdown scheme is where you are able to draw upon funds as and when needed. Typically, a pre approved facility is agreed that you are then free to drawdown against. Compound interest is then only applied on the amount drawn.