How Much Does Equity Release Cost?

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The Costs of a Lifetime Mortgage 

Here’s how to keep equity release costs down. 

The Costs of a Lifetime Mortgage 

It is important to know that due to costs involved, equity release should be considered as a long-term lending solution for the over 55’s to either purchase a new property or release equity.  

The cost of equity release (a lifetime mortgage) is made up of two elements: 

1. The fees. 
2. The interest rate.  

The fees will include your broker advice fee and your legal fee as it’s mandatory to seek independent legal advice as part of the process.

Other fees could include a possible valuation and application fee, these fees are specific to your recommendation and provider similar with traditional mortgages.  Your advisor will recommend the best way forward in relation to these fees, they’ll need to be factored into the overall cost for you to compare whether it’s best to pay an application fee to get a better interest rate or not.

The interest rate payable will be determined by various factors including your loan to value ratio, property type, and your age.  The interest rate on a lifetime mortgage is usually fixed for life therefore it’s important that we get the best deal for you based on your personal situation to save you costs.

Features of an equity release plan are also important, it’s always important to seek professional independent advice when considering equity release to keep your costs down and to avoid expensive mistakes.  It’s important not to focus too much on the initial costs and rate, more getting the right plan with the features for your personal situation.  

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Here’s how to keep equity release costs down. 

Seek advice, our later life mortgage advisors will consider all the alternative lending products that are available for you before recommending an equity release product.  

The other products they can explore to keep the costs down are: 

• Traditional mortgages, both repayment and interest-only options.  
• Retirement mortgages such as a RIO (retirement interest only mortgages). 
• Grants and other non-lending alternatives.  

Another thing to consider with an equity release mortgage, that’s if you’re looking to capital raise, is do you need to raise the money as a lump sum, or would smaller chunks work better?

You are also able to combine an initial lump sum with smaller releases down the line, this type of product is called a drawdown lifetime mortgage, and this can significantly reduce the costs of equity release.

With a drawdown lifetime mortgage, you’ll only start to pay interest on the funds as and when you take them out, therefore, if you do not need the funds there’s no point accumulating interest on the money until you need to.

If you have enough income, another way of keeping equity release costs down is to pay a monthly payment to cover all of some of the interest.  Making these payments will reduce the overall interest costs of equity release and will reduce the erosion time of your equity.

If you are in good health, our later life mortgage broker may recommend a life insurance policy to run alongside the equity release plan, there are a lot of over 50’s life insurance policies available depending on your age, health, and lifestyle.