What the Costs of Equity Release?

What costs are involved with Equity Release?

Do you want to get access to the cash tied up in your house, but worry about the costs? As with anything involving professional services, there are fees involved. But it might not be as much as you think, and if you get an Equity Release deal that works well for you it should be worth it in the long run.

There are many schemes on the market, each with its own benefits and features. Some will not offer any extras, but others will cover many of the below costs for free. As part of the process, all the options will be presented to you clearly by your adviser but, in general, here are the main costs that you will have to bear in mind.

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Fees

Valuation fees

During the application process, the Equity Release provider will get an independent surveyor to value your house. Depending on your property’s type and location, this could be a very quick visit or a more thorough inspection and they will take into account recent sales in the neighbourhood.

Arrangement fees

Just like a mortgage, the lender may charge a fee for setting up the Equity Release scheme, and this will be noted in your offer. It could be a set figure (anything between £500-£1000), or a percentage of the loan amount. You would pay this when the loan is completed, and it can either be added to your loan amount or paid off separately. Note – if it is added to your loan, you will be paying interest on that as well.

Wondering why there is such a big difference between the lower and higher charges? Some providers charge more but might also provide benefits others do not. Your adviser will take all these factors into account when looking for the best plan.

Solicitor’s fees

We can’t predict what your solicitor might charge, but it might come down to their level of service and the attention you need. It’ll be between you and them, but it is necessary to get a solicitor involved to tie up the legal documents and arrange the transfers of funds when the loan is confirmed.

Wondering where to find a decent solicitor who will do a good job for a reasonable fee? We regularly work with some friendly legal firms who are familiar with Equity Release, and would be happy to recommend someone you can trust.

Consultation fees

This is the fee your broker will charge for their services, and will either be a percentage (usually around 1.9%) of the Equity Release amount, or a simple flat fee. Fees vary between brokers, so it is worth shopping around to compare quotes and the style of service they provide. We charge a flat consultation fee which is only due if you actually go through with the Equity Release, so if you decide not to do it then you won’t owe us a penny.

Interest rates

Interest rates play an important part when considering an Equity Release deal. The interest rate will vary according to the amount you borrow, the type of plan you go for, and the prevailing market rates when you take out the loan. Interest is usually only paid when the loan comes to an end (when you die or go into permanent care), but might be of greater concern if you take out a scheme where you can pay the interest back regularly.

Interest rates are currently between 3.7%-6.8%, but should not be the only thing you look at when considering which Equity Release scheme to go for. A scheme with an attractive interest rate might come with additional costs or less favourable terms.

Is there any good news?

Yes, charges for Equity Release schemes are not a one-way street, and customer needs have influenced many lenders to come up with flexible deals to win your business. Many schemes now offer a free valuation, reduced or waived application fees, and some might contribute to your legal and consultancy fees.

Ask your adviser about all these factors when you are discussing which Equity Release scheme will be the best for your needs. They will give you a personal illustration of the scheme and your options, which will break down all the costs and benefits.

Do you want to know more about Equity Release?

Feel free to call us, or drop us a line via the Contact page, for a chat about your needs. It’ll cost you nothing to find out.