Just like a traditional mortgage product, Equity Release does entail a few costs. However, these are usually kept to a minimum and quite often you will see deals where the lender will cover some of them for you. In this section we run through the main costs you should expect when using Equity Release to access the wealth tied up in your property.
• Arrangement Fee
The Provider which is financing your plan may charge an arrangement fee. These may be described as “application” or “administration” fees; These can range from £0 to £1000 on average. You can pay it separately or it can be added to the total amount borrowed, in which case you will also pay interest on this amount. Some lenders charge more than others, but might also provide benefits others do not. Your adviser will take all this into account when looking at the right plan for you.
• Advice Fee
Your Adviser, who will carry out detailed research into the options and recommend the most suitable plan from the range available, followed with a written report containing recommendations and a personalised Key Facts Illustration (KFI). Should you wish to proceed, your adviser will arrange all of the required paperwork with the provider and handle things through to eventual completion and release of the funds; Our typical fee is £549 for this service.
• Solicitor Fee
Your Solicitor, for giving you independent advice on the plan to help you understand how it will work, and for carrying out the necessary conveyancing (legal) work; These fees can vary depending on the type of property involved. The typical fee is between £650 and £1000.
• Valuation Fee
The lender will send a representative to make a valuation of your property. Depending on the location and property type, this could be a full valuation or a short inspection by a surveyor. The fee varies but is often free of charge.
• Interest Rates
As with any loan or mortgage product, interest will be charged on the amount borrowed. In the case of Equity Release, you can choose not to pay until the loan comes to an end – when the borrower either dies or goes into permanent nursing care, and the property is sold. Rates for a wide variety of products are available online and will vary between 2.5%-7%. Most interest rates will be fixed or capped for the life of the loan and will usually be applied on a ‘roll-up’ basis as the term progresses.
• Important Notes
All charges that apply to your Equity Release loan will be detailed in the personal illustration of the scheme that your broker will provide. Don’t ever accept any deal that does not give you a complete breakdown of the charges.
• The Good news
The Equity Release market has become more competitive recently, and many lenders are now offering incentives or free services to attract your business. Again, your advisor will take all these aspects into account when recommending which Equity Release scheme is the right one for you. What might look like an attractive deal on the surface could be more expensive in the long run.