What is the cost of equity release?

20 June 2022

7 min read

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If you’re aged 55+, equity release could help you release value from your home. You still retain ownership of your home and you won’t have to move out. But what costs are involved?

When considering equity release, the question of cost can be one of the most important things to think about. Here, we detail the main costs that should be a part of your consideration when deciding whether to release equity from your home.

Equity release interest rates

The most popular equity release product is a Lifetime Mortgage. One point of consideration when it comes to the cost of releasing equity in this way is the interest rate that will come with your plan.

The interest that is added does not need to be paid monthly. Instead, the interest will roll up over time and only be due for repayment, with the initial amount borrowed, when the last surviving homeowner either dies or enters permanent long-term care. Usually, this will be achieved with the sale of the home. There will also be the option to make overpayments to either service the interest or reduce the costs.

Naturally, by releasing equity from your home in this way, the value of your estate will be reduced in time.

Most products will come with the option to fix your interest rate for life. A qualified equity release specialist will be able to show you an illustration of the exact cost of releasing equity in your personal circumstances.

The cost of equity release advice

The Financial Conduct Authority requires advice to be given before an equity release product can be taken out. It is important therefore to also add the cost of an advice fee when considering what your equity release plans will cost.

Speaking with an adviser is an important stage of the process and very much worth it when it comes to securing your peace of mind. A fully qualified equity release specialist will be able to help you understand all of the potential costs of equity release, as well as assist you with considering the alternatives available.

They will also help you to understand the possible risks of releasing equity, like the effect it could have on your entitlement to means-tested benefits.

Prefer to find out how much equity you could release from your house first? Check out the equity release calculator.

What other costs might be associated with equity release?

As part of the equity release process, you will need to speak with an independent solicitor. It’s their job to take you through equity release and ensure that you fully understand the implications before entering into a contract. There will likely be costs associated with this process, but it’s important to make sure you are making the right choice for your circumstances.

As with any mortgage application, there might be legal work that is required on your behalf and costs associated with conveyancing too. These will usually be made fully apparent to you in advance so that you can factor it into your enquiry.

Lenders will also require a survey on the home to carry out a valuation. There may be associated costs related to this too, but all will be made clear by your chosen adviser before you choose to proceed.

Equity release interest rates

The most popular equity release product is a Lifetime Mortgage. One point of consideration when it comes to the cost of releasing equity in this way is the interest rate that will come with your plan.

The interest that is added does not need to be paid monthly. Instead, the interest will roll up over time and only be due for repayment, with the initial amount borrowed, when the last surviving homeowner either dies or enters permanent long-term care. Usually, this will be achieved with the sale of the home. There will also be the option to make overpayments to either service the interest or reduce the costs.

Naturally, by releasing equity from your home in this way, the value of your estate will be reduced in time.

Most products will come with the option to fix your interest rate for life. A qualified equity release specialist will be able to show you an illustration of the exact cost of releasing equity in your personal circumstances.

The cost of equity release advice

The Financial Conduct Authority requires advice to be given before an equity release product can be taken out. It is important therefore to also add the cost of an advice fee when considering what your equity release plans will cost.

Speaking with an adviser is an important stage of the process and very much worth it when it comes to securing your peace of mind. A fully qualified equity release specialist will be able to help you understand all of the potential costs of equity release, as well as assist you with considering the alternatives available.

They will also help you to understand the possible risks of releasing equity, like the effect it could have on your entitlement to means-tested benefits.

Prefer to find out how much equity you could release from your house first? Check out the equity release calculator.

What other costs might be associated with equity release?

As part of the equity release process, you will need to speak with an independent solicitor. It’s their job to take you through equity release and ensure that you fully understand the implications before entering into a contract. There will likely be costs associated with this process, but it’s important to make sure you are making the right choice for your circumstances.

As with any mortgage application, there might be legal work that is required on your behalf and costs associated with conveyancing too. These will usually be made fully apparent to you in advance so that you can factor it into your enquiry.

Lenders will also require a survey on the home to carry out a valuation. There may be associated costs related to this too, but all will be made clear by your chosen adviser before you choose to proceed.