Homeowners aged 55 and over unlocked £1.17bn of property wealth during Q2 2021. There were 20,352 new and returning customers who accessed some of the cash tied up in their homes.

As the number of borrowers continues to soar and the amount of property wealth that UK homeowners access also increases, it’s ever more important that borrowers understand the costs of equity release and how to reduce the cost of equity release.

You might want to check out our blog post: How much does equity release cost?

There are several costs to consider when taking out an equity release plan – not just the interest rate of your loan, but also advice fees, legal fees and possibly an arrangement fee too.

Here we explain the various costs associated with an equity release plan and how you can keep costs as low as possible.

Before taking out an equity release plan

Before you take out an equity release plan you must seek both financial and legal advice to ensure that you are making a decision that is right for your individual circumstances.

During this part of the process, you can expect to pay legal and advice fees.

  • Advice fees – At Personal Retirement Planning we charge a fixed fee regardless of how much you borrow, or which plan you choose. This approach ensures transparency for clients and there are no hidden or unexpected costs. What’s more, your fee can be deducted from the loan on completion, so you don’t need to worry about paying for this upfront.
  • Legal fees – Compare equity release solicitors to find an affordable provider with great reviews. At Personal Retirement Planning we work with Equilaw, a trustworthy firm of specialist solicitors who are great at what they do and provide transparent fees. Solicitor’s fees are typically around £700 inclusive of VAT, although fees can vary depending on your individual circumstances and your chosen solicitor.

Selecting the right plan

An equity release adviser can recommend the most suitable equity release plan that meets your specific requirements. They will consider the product features and flexibility, the interest rate, and any terms, conditions or restrictions associated with the product to ensure that it’s suitable for you both now and in the future.

You may be tempted to compare equity release products by looking at the interest rate alone. However, there are other factors that come into play such as whether there are any early repayment charges, whether there is an arrangement fee, whether you can borrow additional funds in the future, whether you can port the equity release plan to another property and whether the plan meets the standards set by the Equity Release Council. These are just a handful of the many criteria that we will check for you, whilst ensuring that we find the most affordable plan that ticks all your boxes.

The good news is that equity release interest rates have plummeted in recent years and so we will be sure to find you a great deal.

After you have taken out your equity release mortgage

After you have taken out an equity release plan, there are still ways that you can reduce the cost of equity release.

  • Voluntary repayments – Many equity release plans now offer borrowers the option to repay some of the interest, all the interest or more than the interest – this is known as a voluntary repayment lifetime mortgage and is one of the most cost-effective methods of equity release. By making voluntary repayments, borrowers can reduce the final amount that has to repaid when the property is sold and keep as much equity in their property as possible. This allows borrowers to maximise the inheritance they can leave to family and beneficiaries. What’s more, as repayments are voluntary, borrowers can stop making repayments at any time, and add the interest to their loan instead. Then start making repayments again later if they wish to.

Learn more about voluntary repayment lifetime mortgages here

  • Only draw down what you need – Another way to reduce the cost of equity release is to only draw down what you need, when you need it. This will help to reduce the amount of interest you owe over the life of the plan.
  • Remortgage – Last but not least, our final tip for how you can reduce the cost of equity release is to remortgage. Over the last 10 years the average fixed rate for equity release plan has dropped from around 7% to just 4.32% at the time of writing – although much lower rates are available. If you took out a plan several years ago you are likely to be paying a higher interest rate than what is currently available on the market, by switching to a new plan you could save thousands of pounds in interest over the duration of your plan.

Learn more about an equity release remortgage here

Personal Retirement Planning is a team of specialist equity release advisers and proud members of the Equity Release Council. We can help you decide whether equity release is right for you and ensure that you fully understand how to reduce the cost of equity release. To learn more about how we can help, please call Barry Leigh on 07980 210953 or email info@prpltd.co.uk.

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