Borrowing money against your home can be an attractive option if you need cash to supplement your retirement or to finance a big purchase, but how much will you repay on equity release? 

Nearly 50,000 UK homeowners over 55 took out equity release loans in 2022¹ – and with good reason, as equity release is a viable option for accessing money that would otherwise remain tied up in your home. 

SovereignBoss's seasoned equity release researchers have combed the market's finer details to provide you with the most current information.

Therefore... 

How Much Do I Have to Pay to Take Out Equity Release?

To take out equity release, you will need to pay, on average, between £1,500 and £3,000² in fees depending on the provider and plan you choose. 

This generally covers the following costs: 

• Valuation fees
• Solicitor fees
• Administration fees
• Advice fees

You may find that some providers charge application fees whilst others do not. 

Similarly, some advisors may charge a fixed fee for advice, whereas others may charge a percentage of the amount released. 

If you are looking for ways to minimise these costs, be sure to mention this to your qualified equity release mortgage broker or advisor in your initial meeting. 

They will be able to scan the market and recommend plans with low initial fees. 

Is it really that easy?

It is important to note that low or no fees may sometimes be offset by higher rates.

Will I Repay More than I Borrowed with Equity Release?

Yes, you will pay back more than you borrowed when you decided to release equity.

Essentially, providers charge interest and set up fees in exchange for lending you the money.

How Much Interest Will I Repay on Equity Release?

How much interest you may repay on equity release will depend on the rate you can secure from your provider.

Things that could affect your interest rate include: 

• The amount you wish to borrow
• Your age
• Your health and lifestyle
• The plan you choose
• The current and potential future value of your home

Whilst your beneficiaries are usually required to repay your loan capital and accrued interest out of your estate, the Equity Release Council passed a new rule in March 2022³ that allows new customers to repay a portion of their loans during their lifetime without penalties.

Repaying part of your loan as you go is a great way to mitigate the effect of compounding interest on your initial loan amount and reduce your overall borrowing costs. 

Should you wish to obtain an idea of what the amount you would have to repay could be, an online equity release calculator can provide an approximation.

Do I Pay a Monthly Fee for Equity Release?

No, you do not pay a monthly fee for equity release, but you can make monthly interest payments (and partial capital repayments) if you wish to do so. 

Equity Release with Repayment Option

Equity release with repayment option comes in the form of a lifetime mortgage.

You can repay your loan during it's course in one of two ways:

• Voluntarily repay the monthly interest whenever you can to stop it from compounding.
• Pay a portion of the loan in a 12-month period. Your lender will offer a penalty-free maximum, usually up to 10% of your loan.

Will I Need To Repay My Equity Release Plan Before I Pass Away?

No, you will not need to repay your equity release plan before you pass away, but you will have the option to do so.

The loan repayment responsibility generally falls on your estate upon your passing or relocation to a long-term care facility.

As mentioned above, you now have the option to make penalty-free partial repayments throughout the term of your loan to manage the overall cost. 

However:

If you wish to pay back the entire loan, you may be liable for early repayment fees. 

These fees will vary based on your provider and on the plan you have committed to. 

How Much Equity Release Can You Repay Before You Pass Away?

You can repay some or all of your equity release loan before you pass away, but penalty fees may be attached. 

Partial repayments up to a certain percentage on new lifetime mortgages no longer attract penalty fees, but repaying your loan in full will likely trigger an early repayment charge.

These fees are provider and plan dependent and could either be fixed or variable. 

What Are Early Repayment Charges?

Early repayment charges are fees levied to recoup any losses a provider may suffer if a client were to end a loan earlier than planned. 

Fixed early repayment charges often work on a sliding scale; for example, you may be liable to pay the equivalent of 10% of your loan if you end your plan after the first year.⁴ 

Variable charges are linked to government gilt yield indices⁵ and, depending on the market, may not apply at all or be capped at 25% of your total loan.⁶ 

You may also find that some lenders will do away with any early repayment fees once your loan reaches a certain age.⁷

Common Questions

In Conclusion

As a readily available and convenient option for later-life lending, equity release is a consideration for many over-55s.

Despite the advantage of not having to make any repayments in your lifetime, it would be unwise to disregard the implications equity release could have on your beneficiaries. 

Your best option is to arrange a meeting with a qualified equity release mortgage broker or advisor to find the best plan for your needs and discuss the finer details, such as fees and repayment costs. 

Until then, this article will hopefully have answered some of your questions regarding how much you may repay on equity release.