How much does equity release cost

This question can be a bit like ‘how long is a piece of string?’ It depends who your provider is, how they choose to charge fees and what for, and the interest rates available to you at the time – so, it’s a bit like when you take out a regular mortgage in that sense.

Equity release allows people over 55 to use some of the money that’s tied up in the value of their home. So you ‘release’ some of the cash value of your property and spend it on what you want – such as renovations, topping up your income, lump-sums to your children/grandchildren, travelling, whatever takes your fancy.

The most common type of equity release – and the one we offer – is called a lifetime mortgage. It's a long-term loan on the value of your home that’s repaid, usually by selling your home, when you die or go into long-term care.

Keep in mind…

…equity release is a loan, it’s not a gift. And it’s a requirement from the FCA (Financial Conduct Authority) that you take out financial advice before you get started. A lifetime mortgage reduces the amount of inheritance you can leave behind. It can also affect your tax position and welfare benefits if you get them. But your financial adviser will be able to tell you about all this in more detail.

Here we give you an overview of the costs that can be involved in equity release.

Unlike a regular mortgage, you don’t make any monthly repayments with our lifetime mortgage. So, there’s a higher rate of interest, which builds up on your loan each year. Interest is charged on the original loan and any interest that’s been added, which quickly increases the amount you owe (compound interest).

We add the compound interest to your balance once a year.

There’s no set figure for the interest rate. It’s based on individual circumstances like your age, property value, health and lifestyle details, and how much cash you’d like to release. When you speak to a financial adviser, they’ll give you a personalised illustration that shows you your interest rate.

If you're thinking about repaying all or part of your interest and loan early, you might need to think again. Lifetime mortgages are designed to last for the rest of your life – hence the name.

If you decide to pay off all of your loan and interest early, you could face substantial early repayment charges, although some providers do allow voluntary repayments without penalty, up to certain limits.

The main charges for setting up a lifetime mortgage are an arrangement fee, valuation fee, adviser fees and legal fees. But all providers do things differently – some may not charge for an arrangement or valuation fee, for example, whereas others will.

There are no set amounts for these fees. It’s all based on your own circumstances and the product and provider you’re using.

Don’t worry though, your financial adviser will give you a personalised illustration of how your lifetime mortgage will work – this’ll show you any fees you need to pay and when, before you agree to anything.

Arrangement fee

This helps to cover the provider's costs in setting up your lifetime mortgage.

Valuation fee

Your home will be valued for you. But, again, some lenders won’t charge you for this.

With us, we arrange for your property to be valued independently, but you won’t have to pay any upfront cost for this if your home is worth up to and including £5 million – this cost is built into the price of our lifetime mortgage product. If it’s over £5 million, you’ll find your fee in your personalised illustration.

Legal fees

Similar to a regular mortgage, you have to appoint a legal adviser to act for you and pay them their fees. A standard case can be around £750, but costs really vary depending on which solicitor you choose, from what firm, what they’re needed for, and things like that.

It’s worth window shopping a few different firms and prices before you decide.

Advice fees

Some providers might charge you fees for advice on their equity release products.

For our lifetime mortgages, if you come directly to us and go on to speak to a financial advice firm that we’ve chosen for our product, you won't be charged an advice fee. Instead, we'll make a commission payment to your adviser when your lifetime mortgage completes. All the advice firms we choose are regulated by the FCA.

When you get in touch with us, you’ll first speak to a team that will check you’re eligible for our lifetime mortgage. They’ll arrange a call with an expert FCA-regulated equity release adviser.

This adviser can only give advice about our lifetime mortgage, and they’ll tell you if they think it’s right for you. If so, they’ll give you a personal illustration and go through the all-important details with you – we’re talking benefits, costs and risks. If you come to us directly, you won’t pay a separate advice fee, instead we’ll pay the adviser commission once you complete on your lifetime mortgage.

Transfer fee

Some providers might charge you for transferring money to your solicitor – you might be familiar with this as it can happen with regular mortgages too. With us, you won't be charged for this.

Find out more about an Aviva Lifetime Mortgage