Fees and rates should always be taken into consideration when exploring equity release.
If you are researching equity release, it is important to consider how much it might cost and how this may affect both your present and future goals.
With the most popular equity release product, a Lifetime Mortgage, interest rolls up and this plus the amount borrowed is only due for repayment when the last homeowner passes away or enters long-term care and the home is sold.
This means that the cost of releasing equity will largely depend on the interest rate and vary from individual to individual, depending also on whether you are able to make any payments.
Most equity release plans have an interest rate that is fixed for life. An adviser will show you exactly how much you will owe over time and encourage you to consider making voluntary payments. While repayments are not required, knowing how interest will be added to your loan will allow you to better plan whether you can afford to make optional payments and reduce the overall cost of borrowing.
Should you choose not to make any payments, the interest will simply build over time, which can be a more expensive way to borrow.
In general, the more you release, the higher your interest rate will be. Having a higher interest rate will impact the overall cost of releasing equity.
Interest rates can increase or decrease over time but can be fixed for life at the time of releasing equity, so you don’t have to factor future rate changes into the cost. Your adviser will be able to provide you with the most up-to-date rates that are available to you.
The cash you unlock from your home will be tax-free, as equity release is a loan as opposed to an income.
However, do consider your wider financial circumstances and future plans. A tax-free cash injection could affect your entitlement to means-tested benefits and tax might be due on the way you intend to use the money. For example, if you opt to gift an early inheritance, factor in the possible cost of Inheritance Tax liability.
Depending on the Lifetime Mortgage plan you choose and whether you wish to pay back some or all of the equity you release, early repayment charges may be involved. Your adviser will be best equipped to explain the potential cost of these to you and help you to explore plans that have fixed or defined early repayment charges.
If you decide to proceed with an equity release application, other fees may incur a cost. These include:
Receiving fully qualified advice is an essential part of the equity release process, so factor in the cost of advice fees.
Reader’s Digest Equity Release charge an advice fee capped at £1,490 and this gives you access to one sole adviser, who will be local to you if you opt for face-to-face advice. Your adviser will consider all of the options available to you and work at your pace.
As the advice fee is capped rather than calculated as a percentage of the amount borrowed, you won’t pay more in advice fees for borrowing more. You will only be charged an advice fee by Reader’s Digest Equity Release if you go through with the recommendation made by your adviser. In most cases, you can build your advice fee into the amount released.
Remember: Whatever recommendation your adviser makes, they will endeavour to help you achieve it. Should they recommend you explore a solution that isn’t equity release, they can explain the costs that may be associated.
Launched in 1922, Reader’s Digest has worked hard to build over 100 years of trust by providing useful guides and top tips about the topics that really matter. Now, Reader’s Digest has chosen to work with Responsible Life to provide you with a quality mortgage advice service. You’re in good hands, as they have over a decade of experience and over 1,500 5-star reviews on Trustpilot.
Responsible Life only work with lenders approved by the Equity Release Council. This means that all of the Lifetime Mortgage products you can access have customer needs at their core.
We have carefully selected a range of products with flexible features prioritised throughout. We've designed this selection of products to offer fair value for you and your family, both now and in the future.
At Reader's Digest Equity Release, we will assess your suitability for a range of solutions designed to help you take advantage of your property wealth. We find that the most popular way of releasing equity is with a Lifetime Mortgage. However, we want to ensure that you have access to a wide range of solutions and can also provide you with access to Retirement Interest-Only Mortgages and traditional mortgages if these are more suitable.
If we cannot recommend a product from our pre-selected panel, we may be able to refer you to a service that considers options from the wider market. Your adviser will discuss this with you as part of the advice process. Full details about the products we offer and their associated features can be obtained from your adviser.