What providers say about equity release early repayment charges
How much your equity release early repayment charges will be depends on your plan, provider and your own circumstances at the time of repayment.
Below, we take a look at what some of the big name providers offer in terms of their ERCs. Don’t worry if some of their terminology is confusing; our selected advisers can explain everything in a jargon-free language and answer any questions you have about charges.
This provider offers fixed percentage ERCs. Their Variable Individual Gilt ERCs have not been available to new customers since January 2022. Their fixed percentage ERC period is 15 years after taking out the lifetime mortgage, unless you borrow an additional amount after your initial loan.
Legal & General
L&G’s ERCs are capped at 25% of the amount(s) drawn and linked to movement in UK FTSE Actuaries 15 Year Yield (the Index). As it levies government bond-based early-repayment charges, you could incur high fees if you choose to pay your loan back early. However, you will not be charged any ERCs if the Index at the time is higher than or equal to the Benchmark Rate shown in your Offer of Loan.
LV has fixed ERCs across all its products, with none to pay after 10 years. Notably, for Lifetime Mortgage Drawdown+ plans, the early repayment charge is based on the completion date of the original loan, rather than the date of further withdrawals made.
The early repayment charge is 5% in the first five years of arranging your plan. This reduces to 3% during years 6 to 8. Their ERC period is 8 years after taking out the lifetime mortgage, unless you borrow an additional amount after your initial loan.
This provider offers fixed early-repayment charges with two time scales available. Their Capital Choice Plan, for example, ensures customers pay no more than 5% in ERCs if the loan is repaid in the first five years. In the second five years of the plan, the ERCs fall to 3 per cent, and after 10 years there is no penalty at all.
Alternatively, their 15-year time scale begins at an ERC of 10% in Year 1, 9% in Year 2 and so on. There is just a 1% fee applicable for Years 10 – 15 with no penalty thereafter for homeowners paying back equity release.