Equity Release Costs in Oct 2021

4 Costs of Equity Release Schemes in 2021 You MUST Know

What are the 4 MAJOR Costs of Home Equity Release Schemes & What Are the Hidden Fees? Discover the Costs of Releasing Equity & Make an Informed Decision Today.

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What are the Costs of Equity Release?

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Be careful with equity release or you could end up wasting money!

Here’s the thing, it can be a expensive process, but it doesn’t necessarily need to be. With the right advice, you can save buckets of hard-earned cash while joining the over 10,000 UK retirees who’ve unlocked the key to their retirement dreams in 2021.

Knowledge is power, so we’ll help you discover:

  • What are the equity release charges in Oct 2021.
  • The secret of how to pay for equity release.
  • Where these charges come from.
  • Weighing up cost to value when it comes to equity release.

They say that it takes 10,000 hours to master a skill. Well, we’ve certainly done the work. Our expert team has analysed over 220 plans by every regulated plan provider in preparation to give you the best advice on the market. And it’s FREE!

We’ve compared the expenses involved with a range of advisers, plan providers and solicitors, to weigh up the average and determine what fair equity release expenditure should be.

We’ve researched for you, so all you need to do is read. Find out NOW!

What Is Equity Release?

Equity release is an umbrella term for mortgages that are designed for older homeowners. If you’re aged 55 or older, and you own your home in the UK, you could qualify to unlock the cash tied into your home.

The 2 main types of equity release are a lifetime mortgage and a home reversion scheme. In both cases, payments are only expected when the last homeowner passes away or moves into permanent care.

With a lifetime mortgage, you’ll retain 100% ownership of your estate. You’ll unlock cash in a lump sum, regular payments, or a combination of both. The loan, plus interest, is then repaid from the sale of your home.

In the case of a home reversion scheme, you’ll sell all or a percentage of your estate in exchange for equity. The lender will then collect their portion when the home is sold after you’ve died or moved to a care facility.

Before you continue reading, we’ve summed up the most important information about equity release in this quick video. Check it out!

Learn More: What’s Equity Release?

What Fees Will You Pay?

When you’re working out the cost of equity release, there are three services that you’ll need to budget for:

  • Surveyor’s valuation 
  • Solicitors’ fees
  • Lender’s application 

What Are the Equity Release Set-up Costs?

There are some initial charges to be aware of when it comes to releasing equity from your home. However, these may differ, depending on your plan provider.

Note that the charges involved with equity release can be covered from the funds unlocked from your home.

These expenses typically include:

  • Advice Fee
  • Application Fee

Check out: Equity Release: The Best Ways to Minimise Setup Costs

The Financial Advice Fees

Advice Fee

To take out a lifetime mortgage or a home reversion plan, you must get reliable financial advice. But the amount you pay for this advice can drastically differ. Do not be deterred by higher charging advisers if they come with top-notch experience. It might just be worth the investment.

Your adviser’s role is to do all the essential research and groundwork to help you find the right plan available on the market.

Some will charge 1.5% – 2% of the total equity released, while others may have a flat fee. With a reliable equity release specialist, this can set you back around £900 to about £2000 in Oct 2021.

Take note!

A legitimate adviser will be able to indicate these charges upfront.

The Plan Contributor’s Costs

Application Fee

Also known as arrangement fees, these cover the equity release provider’s legal expenditures and administration charges.

As with advice charges, these will differ from one plan provider to the next. Your financial adviser will help you understand the application fees for your chosen plan.

The Inspection/Property Valuation Fees

What Other Costs Are There?

In addition to the initial set-up cost, there will be additional expenses during the equity release process. These being:

  • Surveyor’s Valuation Bill
  • Solicitor’s Bill

Surveyor’s Valuation Bill

Your plan provider needs an independent evaluation and property valuation for 2 reasons:

Firstly, it is to give your provider a current market value for your estate (based on the current sale price of your house) so that they can assess how much you can borrow.

Secondly, it is to ensure that your estate is in pristine condition for your family. If it isn’t, then the plan provider is obliged to decline or insist that you have essential repairs carried out, either pre or post-plan completion.

Surveyor valuation prices are dependent on the estimated value of the property. However, you can find lenders who can offer you a free valuation. It all depends on your initial agreement with your plan provider.

Don’t get caught in a position where you take a higher interest rate for a free valuation. You might be sorry later.

Pro tip: Whenever working with a surveyor, make sure that they are RICS registered.

Solicitor’s Fees

In addition to financial advice, you will also require independent legal advice from a solicitor, as per a ruling by the Equity Release Council. Both the lender and the individual taking out a plan need a solicitor to avoid any legal disagreements.

Learn more about: Equity Release Advice

The Professional’s Fees

What Interest Rate Do You Pay on Equity Release?

Interest rates will differ according to the type of plan you select, your plan provider, your age, your health condition, and the amount of equity you release from your home.

The great news is that interest rates are at an all-time low, with some people achieving rates as low as 2.3% in Oct 2021!

Learn all there is to know about: Equity Release Interest Rates in 2021

Do I Need to Pay Tax on Equity Release?

The short answer is no!

Equity release is seen as a loan rather than a form of income. As a result, you receive tax-free cash.

There might be tax implications based on how you spend the cash. Inheritance Tax might be applicable if you gift family members with the money.

You can ask your financial adviser if your equity release use will incur tax.

Is Equity Release a Competitive Means of Borrowing?

The short answer is yes!

With equity release interest rates at an all-time low, it’s definitely a competitive means of borrowing.

You’ll pay similar rates for an ordinary mortgage or loan, plus you won’t have to pay anything back in your lifetime, unlike in the case of other means of borrowing.

Therefore, equity release is convenient and stress-free.

What Is the Total Cost?

While the total might vary depending on your selected lender and representation, you can expect to pay somewhere between £1500 to £3000 to release equity from your home.

In addition to this, there is, of course, the interest that can either be covered in monthly installments, or settled when you pass away or move into permanent care.

The process is generally pretty stress-free if you have guidance, and the costs can be pulled from the equity released from your home.

Check this out! What is the Equity Release Process?

When Do You Pay Your Equity Release Fees?

Do you want to unlock equity, but fear that you don’t have the means to do so?

Don’t worry!

You can pay all the costs involved with equity release from the cash you unlock. Therefore, it’s essential to factor these fees in when you consider how much equity you’d like to release from your home.

Take note: Some lenders may require you to pay the surveyor’s fee upfront but you can ask your financial adviser for more details on the matter.

How Else Can You Reduce the Cost of Equity Release?

There are some secrets to share on how to reduce the costs of equity release. Here are 4:

  • Downsizing protection – If you want to move to a smaller home, you won’t have to worry about early repayment charges that could cost you a fortune.
  • Interest repayments – While you not obligated to repay equity release in your lifetime, you can, if you want to. This will stop the interest from compounding, drastically reducing the overall cost of the loan.
  • Loan repayments – With some plans, you can pay back up to 10% of the loan annually.  
  • Drawdown reserve – This means that money stays in a reserve, and you only pay interest on the cash you use.

Got Questions? Check These First

How Much Does It Cost to Release Equity?

Is Equity Release Tax-Free?

Will the Providers Give Me a Breakdown of Costs?

In Conclusion

Overall, it’s essential that before you embark on the journey to taking out equity on your house, you get independent advice. A financial adviser will talk you through the specifics – including how much equity release will set you back – so you can figure out whether it’s the right option for you.

In addition, now that you know the expenses involved, use our Oct 2021 equity release calculator to find out how much cash is tied up into your home. Perhaps your dream retirement is closer than you think?

Editorial Note: This content has been independently collected by the SovereignBoss advisor team and is offered on a non-advised basis. Sovereignboss may earn a commission on sales made from partner links on this page, but that doesn’t affect our editors’ opinions or evaluations. Learn more about our editorial guidelines.

Contributors: Nicola Date, Katherine Read
Edited by Rachel Wait
Reviewed by Francis Hui

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HOW MUCH EQUITY CAN YOU RELEASE?

Most people are using equity release as a means of retaining the use of their house while also obtaining a lump sum or a steady stream of income. Get matched with an expert and check your eligibility for equity release options.

Use our free equity release calculator & see how much you can release today.

How Much Can You Release?

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Written by
Rachel Wait
Personal Finance Journalist

Rachel is an experienced finance journalist and editor with a particular interest in personal finance and consumer affairs. She has vast experience writing about money issues, property, insurance, and consumer affairs, and you’ll find her articles regularly featured in top media and newspaper publications.
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Written by
John Lawson
Founder SovereignBoss

John is passionate about education and has made it his life-long mission to assist UK citizens on their future financial options, with a specialist interest in equity release, and SovereignBoss is the natural extension of this passion.
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Written by
Francis Hui
Senior Risk Manager

Having held various high-level roles across the industry, Francis is truly an expert in aiding UK citizens in their financial decisions and risk analysis. His unique insight and statistical knowledge make him the perfect person to help you take your financial future to the next level.
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Written by
Katherine Read
Financial Planning Reporter

Since joining the editorial team at SovereignBoss, Katherine has become focused on bringing transparency to finances and opportunities for those approaching retirement age. She writes on the topics of equity release, home reversion, and mortgages.
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Written by
Nicola Date
Writer & Financial Journalist

Nicola is a financial writer for SovereignBoss and is passionate about the opportunities that equity release can open up for homeowners. Her extensive business experience and deep understanding of the industry means that she’s always up-to-date with the latest developments.

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