Equity Release Costs: What You'll Actually Pay
Equity release costs come in two parts: upfront fees for advice, valuation, arrangement and legal work, which together commonly total around £1,500 to £3,000, and the interest that builds up on the loan. With no monthly repayments, compounding interest over 15 to 20 years is usually the far larger cost.
This guide takes you through each cost in the order you are likely to meet it. It is general information, not financial advice. For how equity release works overall, see our equity release guide.
Equity release costs before you apply
Equity release is regulated by the Financial Conduct Authority (FCA), so you must receive advice before taking a plan. Advisers may charge:
- A fixed fee, typically £1,000 to £2,000, sometimes payable only if the plan completes.
- A percentage of the amount released, commonly around 1-2%.
- No direct fee, where the adviser is paid by the lender. It is worth asking how your adviser is paid.
The lender also needs a valuation. Some include it free; others charge typically £300 to £600.
Arrangement and legal fees
Once you choose a plan, you may also pay:
- An arrangement fee, often around £500 to £800. Some plans are fee-free, with the cost reflected in a slightly higher interest rate.
- Your own solicitor's fees, typically £500 to £1,000. Independent legal advice is required before completion.
- The lender's legal costs in some cases, adding a few hundred pounds.
Some fees can be added to the loan instead of paid upfront, but interest is then charged on them for as long as the plan runs.
How compounding interest drives the total cost
On a standard lifetime mortgage, interest is added to the loan each year and then itself attracts interest, so the balance grows faster over time.
For example, £50,000 at an assumed fixed rate of 7% a year, with no repayments, would grow to roughly £190,000 after 20 years. The rate and how long the loan runs usually matter far more than the fees.
Many plans allow voluntary partial repayments without a charge, often up to 10% of the amount borrowed each year, which can slow this growth. Our equity release calculator gives an indicative idea of how much you could release; it is not a quote.
Early repayment charges
If you repay a lifetime mortgage early, for example by moving without transferring the plan, an early repayment charge (ERC) usually applies.
- Fixed ERCs reduce over time, often starting around 5-10% and falling to zero after 8 to 15 years.
- Gilt-linked ERCs depend on how government bond yields have moved, and can occasionally be larger.
- Downsizing protection on many plans waives the ERC if you move to a property the lender will not accept, usually after a minimum number of years.
Our guide to equity release early repayment charges explains these in more detail.
Factors that affect the total cost
- Drawdown versus lump sum. With drawdown, interest only builds up on money you take.
- How many plans are compared. Rates and fees vary between lenders.
- Voluntary repayments, even small ones, slow compounding.
- Fee-free versus fee-paying. A fee-free plan is not always cheaper over many years.
Equity release can provide tax-free money without monthly repayments, but it reduces the value of your estate. Our overview of how equity release works covers the protections most plans include.
Not sure where to start?
Because the total cost depends on your age, health, property and how long the plan runs, a personalised illustration from an FCA-regulated adviser is the only reliable way to see your figures. Our guide to finding a regulated equity release adviser explains what to check first, or explore all your later-life options.
Want a clear picture of what equity release would cost in your situation?
Frequently asked questions
Are equity release fees paid upfront or added to the loan?
It varies. Advice and valuation fees are sometimes paid upfront or only on completion, while arrangement fees can often be added to the loan. Adding a fee avoids using savings, but interest is then charged on it for as long as the plan runs. Your illustration should show how each fee is paid.
Is a fee-free equity release plan always cheaper?
Not always. Fee-free plans avoid an upfront arrangement fee but often carry a slightly higher interest rate. Over a short period that may cost less, but over many years the higher rate can outweigh the fee saved. Comparing the amount owed after different periods gives a clearer picture than the fee or rate alone.
What is the difference between the interest rate and the total cost?
Rates are quoted as a monthly equivalent rate (MER) or annual equivalent rate (AER), which differ slightly because of how interest compounds. The total cost adds fees and the effect of compounding over the life of the plan. The amount owed after several years, shown on your illustration, is often the most useful figure to compare.
Can I reduce the interest that builds up on equity release?
Some features may help. Drawdown plans only charge interest on money you take, many plans allow voluntary partial repayments without a charge, and some let you pay the interest monthly. Each has trade-offs, such as needing regular income, so it is worth discussing with an FCA-regulated adviser.
What happens to the costs if I repay early or move?
Repaying a lifetime mortgage early may trigger an early repayment charge, depending on the plan terms and how long you have held it. Many plans can move to a new home the lender accepts, and some waive the charge when downsizing or after one partner dies. See our guide to early repayment charges.