Equity Release No Early Repayment Charges in Jan 2022

Are Equity Release Early Repayment Charges Mandatory? We've Got News

Contributors: Nicola Date, Katherine Read. Reviewed by Francis Hui

If You're Not Careful, Cancelling Your Equity Release Plan Could Cost a Fortune & You'll Regret Ever Agreeing on Equity Release in the First Place. We've Got a Secret to Share!

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Can You Actually Arrange No Early Repayment Charges for Your Equity Release Plan?

You can indeed have your cake and eat it when it comes to equity release!

With 1000’s of UK homeowners over 55 releasing equity every month, the question is, do all those individuals consider that life isn’t always predictable?

Equity release is intended to last for life, but we all know that circumstances can change. Perhaps you urgently need to sell your home or move overseas to be close to family. If not careful, you might find yourself paying a fortune to settle your equity release plan in full.

However, we’ll help you discover:

  • How to avoid paying exorbitant early repayment charges.
  • The secret of how to reduce early repayment charges.
  • If early repayment charges are entirely avoidable.

Are you wondering how we discovered these secrets? Well, after researching over 220 equity release plans from 18 plan providers and comparing each plan’s early repayment charges, we’ve got the inside scoop.

Could you cancel your equity release plan with no stress, no fuss? Let’s find out now!

What are Early Repayment Charges?

Early repayment charges are a penalty you’ll pay for canceling your equity release plan before it comes to an end. These charges will vary, depending on the amount indicated by your plan provider.

PRO TIP: Always inquire about your plan’s early repayment charges before taking out an equity release plan.

early repayment

5 Reasons Why You MIGHT Cancel Your Equity Release Plan

While equity release might be intended for life, you never know how your plans might change. Here are 5 reasons why you could find yourself canceling your equity release plan:

  • Unforeseen immigration1.
  • Urgently needing some money from the sale of your home.
  • The desire to move to a house that won’t qualify for an equity release.
  • The desire to move into an informal structure, like a boat or caravan.
  • Wanting or needing to move in with friends and family.

Whatever the case, you must make an informed decision before taking any drastic steps. Speak to your trusted financial adviser to guide you through the equity release process.

downsizing 2

Downsizing Protection and Equity Release

Great news!

Some lenders offer downsizing protection2, and it’s a great special feature to look out for when selecting an equity plan. It allows you to move into a smaller home after 5 years and repay your outstanding mortgage debt3 early, without incurring any penalties.

Let’s look at an example:

If you sell your home for £500,000, with an existing lifetime mortgage debt of £200,000, you can clear your debt and buy your new home with the profit. All this without paying an extra cent.

Note: Remember to weigh out the pros and cons. Plans with such features might come with higher interest rates.

standard charges

Standard Early Repayment Charges

Early repayment charges will generally be determined by guidelines set out by the individual lender. Some will opt for a percentage of the equity released or a set amount determined by the original equity unlocked.

This percentage can also be on a scale, based on how long ago you signed your equity release plan. For example, you might pay 5% for the first 3 years, 3% for the next 5, and nothing after that time.

The lender could use a complex calculation to determine the early repayment charges you’d have to pay. In such cases, seek counsel4 from a finance professional, like your trusted financial adviser.

They could base this calculation on:

  • Benchmark interest rates.
  • Rates that are linked to an index of government gilts5.

Early repayment charges can be steep. In some cases, they’re as much as 25% of your initial loan amount.

It’s always wise to shop around for your equity release plan and find out about these rates. That way, you can find the best option for you and your family.

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You Could Achieve No Early Repayment Charges!

Sounds too good to be true? Fortunately, it’s not!

Most equity release lenders offer plans with early redemption charges for the first 3 years of your equity release.

Others will set a maximum age, and from there, no early repayment charges will apply.

In some cases, you’ll only need to worry about early repayment charges for the first 5 years of your plan. Once this point has been reached, charges will no longer apply.

Common Questions about Early Repayment Charges

Where Can I Get the Best Equity Release Advice?

Can You Pay Off Equity Release Early?

Who'll Be Able To Teach Me About Early Repayment Charges?

In Conclusion

While equity release is intended for life, you might be in a situation where you’ll need to settle your plan early.

While many plans allow you to make repayments, paying off your plan in full is a whole different ball game.

It’s essential to learn your plan’s early repayment charge structure before signing on the dotted line. Knowledge is power, and it’s always best to have it in advance.

Discover all the pros and cons of equity release, and speak to your financial adviser before making any final decisions. While equity release could change your life, you’ll want to be equipped before taking the plunge. Luckily, we’re here to assist you!

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.

rachel w

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.

Reviewed 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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Katherine Read
Consumer Affairs Writer

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.

Nicola Date
Writer & 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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