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Author: Carl Shave-Director
Updated on May 28th, 2024

What are the costs of Equity Release?

Just like a traditional mortgage product, Equity Release does entail a few costs. However, these are usually kept to a minimum and quite often you’ll see deals where the lender will cover some of them for you.

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How much does Equity Release cost?

We understand nobody likes nasty surprises further down the line. Therefore, we want to make sure you’re informed about every step of the process.

Below we run through the main costs you should expect when using Equity Release to access the wealth tied up in your property. Obviously everyone’s situation is different, meaning that what you pay and what someone else pays in costs will be different.

If you want to get an accurate idea of what the costs of your plan might be, get in touch today. Our expert advisers will be able to run through your situation over a free no-obligation consultation.

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What are the costs of releasing equity?

Valuation fee

The lender will send a surveyor to make a valuation of your property. Depending on the location and property type, this could be a full valuation or a short inspection. The fee varies but is often free of charge, as it can be included in your arrangement fee.

 

Arrangement fee

Similar to a mortgage, the lender may charge a fee for setting up the loan and this will be quoted in your written offer. It will be either a set amount (anything between £500–£1000), or a percentage of the loan value.

It is then payable when the loan is in place. You can pay it separately or it can be added to the total amount borrowed. If it’s added to the loan, you will pay interest on the amount.

Some lenders charge more than others but might also provide benefits that others do not. Your adviser will take all this into account when looking at the right plan for you.

 

Solicitor’s fees

Unfortunately we cannot estimate how much your Equity Release solicitor fees would be. This will be between you and them, and it will vary according to the individual.

However, we regularly work with a few reputable and reasonable legal firms with experience in mortgages and Equity Release. This means we would be happy to recommend one you can trust.

 

Consultation fee

This is the fee charged by your Equity Release broker and will either be a percentage of the loan amount, or a flat fee.

Fees vary between brokers, so it’s advisable to shop around and compare charges, as well as levels of service.

The consultation fee is usually charged upon completion of the agreement. Therefore, if you don’t go ahead with the Equity Release plan, you won’t have to pay anything. Many brokers even offer free consultations, which can be really useful and allow you to shop around.

 

Interest rates

As with any loan or mortgage product, interest will be charged on the amount borrowed. In the case of Equity Release, you can choose not to pay until the loan comes to an end and pay it when the borrower either dies or goes into permanent nursing care, and the property is sold.

Equity Release rates for a wide variety of products are available online and will vary between 5.6%–9%. Most interest rates will be fixed or capped for the life of the loan. They’ll usually be applied on a ‘roll-up’ basis as the term progresses.

When you don’t make repayments, the interest on the loan is simply added to the total amount you owe. This is the “roll-up” part.

All charges that apply to your Equity Release loan will be detailed in the personal illustration of the scheme that your broker will provide. Don’t accept any deal that does not give you a complete breakdown of the charges.

How can I get the best interest rate for an Equity Release mortgage?

An Equity Release plan with the lowest rate may seem ideal, but it may not be the best deal in the current market. This is due to differences in interest rates on Equity Release loans, which can be based on the loan size, the value of your house, the location, and even the provider and schemes themselves.

Going through the huge amount of schemes on the market to find a favourable interest rate can be a difficult and confusing process, but it doesn’t have to be.

Approaching an independent adviser or Equity Release broker can assist in this process and help you gain access to exclusive deals not featured on a lender’s website. They will also be able to use their experience to determine who the most suitable lender based on your circumstances will be.

Reach out today and you can discuss your situation over a free no-obligation consultation

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The good news for Equity Release Mortgages

The Equity Release market has become more competitive recently, with many lenders now offering incentives or free services to attract customers.

Depending on the size of the loan, some lenders might offer a free valuation, or waive their application fee. Some may even contribute to your legal or consultation fees.

Again, your adviser will take all these aspects into account when recommending which scheme is the right one for you. What might look like an attractive deal on the surface could be more expensive in the long run.

It doesn’t cost you anything to find out more about Equity Release, and you won’t be charged for the initial conversation with our adviser.

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