Equity release costs - how much does it really cost to release equity?

According to the Equity Release Council, average equity release costs range from between £2,000 and £3,000 however what you pay will depend on the amount you release and the product and provider you choose.

Arranging a lifetime mortgage is similar to arranging a standard mortgage. There are some initial charges you will incur for setting up the loan, in addition to the ongoing interest that is charged on what you borrow.

The following information will help you understand how much equity release costs, the various fees incurred and how to reduce overall price you pay.

How much does equity release cost?

The cost of releasing equity from your home typically inludes the following services, however some of the fees may be discounted or free depending on the product you choose:

• Fees for professional financial advice £900 - £1,900
• Your mortgage lender’s arrangement fees £500 - £1,000
• Surveyor’s fees for the valuation of your home £200 - £400
• Solicitors' fees for independent legal advice £500 - £1,000

Then if you go ahead with a lifetime mortgage, interest will also be payable on the loan amount.

Equity release set up costs - a closer look at your initial fees

Here is a more detailed breakdown of the initial fees you incur when arranging a lifetime mortgage:

Arrangement fees

Your chosen lender may charge a fee for setting up your lifetime mortgage. The size of this fee varies between lenders, and will be quoted in your written offer, so you'll know in advance how much you'll have to pay. It will be either a set amount (anything between £500 and £1,000) or a percentage of the loan value.

Surveyor’s fees

To assess the current market value and to ensure the property is in good condition, your lender will arrange for a surveyor to value your property. Depending on your home's location and property type, this could be a short inspection or a full valuation ranging from £200 to £400.

Depending on your lender, this valuation may be free of charge. Some lenders may charge more than others but may also offer extra benefits. Your adviser will take all this into account when recommending the right plan for your needs.

Solicitor’s fees

If you plan to go ahead with the lifetime mortgage, you will need to instruct a solicitor, preferably one with experience in dealing with lifetime mortgages.

For a fee of between £500 to £1,000 your solicitor will handle all of the legal work on your behalf and ensure everything is in order. It is an Equity Release Council rule that you must engage a solicitor who is independent of your lender and you must meet with them at least once before proceeding.

Advice fees

The good news is that most credible companies give initial advice free of charge.  You only pay if you decide to go ahead and act on their recommendations. So, if you're asked to pay for advice in advance, it may be worth looking elsewhere.

If you decide to go ahead with equity release, your adviser will typically charge you either a flat rate ranging from £900 to £1,900 or 1.5% to 2% of the amount you are borrowing.

Ongoing equity release charges

The ongoing cost of equity release is the interest charged on your loan, which accumulates and is repaid when you die or move into long term care. For more information on how interest could grow over the loife on teh plan, take a look at our equity release compound interest calculator .

If you prefer to keep costs down, plans are available that allow you to make monthly repayments against some or all of the interest.

How can I reduce the cost of equity release?

There are a number of things you can do to reduce your overall equity release costs:

• Compare lifetime mortgages - you can either do this yourself, or use the free services of a specialist IFA or broker (you only pay their equity release fees if you go ahead)
• Try to reduce the charges – by seeing if a deal can be done with either the adviser, lender or solicitors fees
• Make monthly repayments - either against some or all of the interest to keep the overall cost of the loan down
• Choose downsizing protection – to avoid charges if you want to repay the loan early
• Choose a drawdown plan – so you only pay interest on the money you release

When do I pay my equity release set up costs?

Most of the equity release set up costs are payable once your lifetime mortgage is in place. This includes the adviser and lenders fees if applicable as well as the solicitor fees.

The lenders fees can be paid as a one-off or if you prefer, added to the sum you're borrowing, however in this case you will also pay interest on the fee.

And finally, the surveyor’s fees if applicable will need to be paid for when they value and assess your property.