Blog > Understanding the fees and charges of equity release

Understanding the fees and charges of equity release

Mature woman with son

By Clare Yates • 25th April 2023 • 5 min read

How much does equity release cost?

If you’re thinking about accessing some of your property wealth via a lifetime mortgage, it’s wise to spend some time understanding the fees and charges of equity release. As with a standard mortgage there will be set-up costs and fees to consider, in addition to the interest rate you’ll be offered.

Each provider will have their own fees and charges. For instance, some providers waive certain fees, while some fix the length of time that their early repayment charges will apply for.

To help you get a clearer picture of the costs of equity release, read on to explore the following:

  • A quick outline of equity release
  • Initial set up costs
  • Interest rates
  • Solicitor fees
  • Early repayment charges
  • Advice fee

A quick outline of equity release

Equity release is available to homeowners aged 55 and over, letting you unlock a tax-free cash lump sum from the value of your home. You can spend the money however you wish after any outstanding mortgage is first paid off. 

There are typically no monthly repayments to make as the interest can be left to roll up. When you pass away or move into long-term care, the money from the sale of your home will repay your loan plus interest.

To find out how much you could borrow, check here or talk to one of our friendly consultants by calling 0808 178 3055 or request a call back.

Initial set up costs

Your lender may make a number of charges, including valuation, arrangement, application and completion fees. If your application takes longer than six months to process then some lenders will charge a revaluation fee.

Some of these fees can be paid from the money you borrow, so you may not have to worry about finding them from your existing savings.

Some lenders might waive some or all of these fees, and our selected advisers can explain this to you during their advice and quotation process. For instance, Aviva does not charge upfront valuation fees on initial borrowing for properties worth under £5 million.

Interest rates

As with other types of lending, the most significant cost of equity release with a lifetime mortgage is typically the interest that will accrue over the lifetime of your plan. 

The interest that accrues depends on the rates available when you arrange your plan, and the type of plan you select. Typically, the interest on a lifetime mortgage will work in this way:

  • Interest on the amount borrowed accrues during the first month (or first year with some plans) and is added to your loan.
  • The interest then ‘compounds’, which means interest is added the following month or year to the sum of the original loan and any interest accrued so far.
  • This process continues each month or year until the plan comes to an end, usually when you pass away or move into long-term care.

To prevent or reduce interest building up on your plan, you can select an interest-only equity release plan where you make monthly interest payments. Alternatively, you may be able to make voluntary repayments of the loan itself penalty-free up to a certain amount each year. Some plans even allow you to pay off up to 10% of your overall loan each year without incurring any charges. 

You can read more about equity release interest rates here, including the latest rates available.

If you take out a home reversion plan then there is no interest on your plan. This reflects the fact that you sell all or some of your home to your chosen lender at considerably less than the market value. 

Solicitor fees

Equity release fees charged by solicitors vary depending on the firm you choose and how complex your case is. When checking over any quotations that you are sent, you may want to check that your solicitors’ fees for equity release cover:

  • Legal advice
  • Bank transfer charges
  • Checks for money laundering
  • Land Registry Office copy entries
  • VAT

You may also have to pay a surveyor’s fee, which you typically pay on application.

Read more about equity release solicitors here, including what they do, the fees they charge and how to find one.

Early repayment charges

As the name suggests, a lifetime mortgage is usually a long-term commitment, so if you choose to repay your loan early then you may incur an early repayment charge. 

This applies if you pay the loan off in full, or make an ad hoc payment on your loan that exceeds your penalty-free limit for the year.

Early repayment charges are often fixed for a certain number of years. After this timeframe has passed, you will be free to repay your plan in full without incurring any penalties. There are other circumstances too when you may be exempt from paying them, such as ‘downsizing protection’ where you can move home penalty-free in certain circumstances.

When you arrange equity release, your adviser will explain all the applicable costs of equity release, including early repayment charges.

Read more about early repayment charges and exemptions here: Can you pay back equity release early?

Advice fee

Our selected advisers will take the time to understand your current and future needs before searching for the best option for you. They will also ensure you fully understand the fees and charges of equity release and can answer any questions you have. 

For peace of mind, any initial advice or information you receive from our selected advisers is completely free and without obligation. You will only pay them a fee if you apply for a plan they recommend AND your case completes. This fee can be paid from the money you unlock, so you do not have to worry about finding it during the application process.

Contact us today to speak to an adviser about your eligibility for a plan and the likely fees. Call 0808 178 3055 now or click here to arrange a free call back.

How can we help?

To find out more about equity release or arrange a consultation with an adviser, please call or request a call back and we’ll be happy to help further.

Let’s talk

Let us help with your questions or arrange a quote.

Call 0808 178 3055

Request a call back

Book a call at a time that suits you and we’ll call you back.

Request a call back

Are you eligible?

Find out how much tax-free cash you could release.

Check now

Apply for your no-obligation equity release quote

Find out if you qualify for equity release and how much you could borrow. Just click ‘Get started’ or call us on 0808 178 3055 and one of our team will be delighted to help arrange a free consultation and quote*.

Start your quote journey icon

1. Start your quote journey

Simply click ‘Get started’ to begin your search for the best plan for your circumstances.

Tell us what you need icon

2. Tell us what you need

Fill out some simple details about your situation so we can start to prepare your quote.

Compare your best deals icon

3. Compare your best deals

You’ll get personalised quotes tailored to your unique circumstances and goals.

Related blogs

Read more about equity release and other consumer finance matters.