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Free equity release guide
Understanding the costs of equity release
Equity release allows homeowners aged 55+ to unlock some of the value in their property. It's important to understand the costs before making a decision if it's right for you.
The total cost of equity release depends on a variety of factors. Here's a breakdown of key costs to consider with a lifetime mortgage, a loan secured against your home:
When setting up an equity release plan, there are several costs to consider, separate from the loan amount itself. These fees vary depending on your provider and the specific plan you choose.
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Surveyor's valuation: A property survey is required as part of the application process. With Key, an independent RICS surveyor will assess your property and provide a valuation for equity release purposes. Their report will be sent to the lender. This fee is typically paid during the application stage.
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Solicitor's fees: A solicitor will handle the legal aspects of the equity release process. This ensures all documentation is in order. The fee usually costs around £1,250, and is generally paid when you receive your tax-free funds upon completion.
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Lender’s arrangement fee: You may be charged an arrangement or administration fee by the lender, which covers setup and legal costs. These fees typically range from £0 to £695, depending on the plan. This fee is usually paid when your plan is complete and funds are released.
Interest is the the largest cost associated with equity release.
With a lifetime mortgage, interest builds up over time, and unlike traditional mortgages, you don’t need to make monthly repayments. Instead, the interest accrues, then rolls up and adds to the loan. This is also known as compound interest.
At Key, we offer fixed interest rates for life, ensuring the rate remains the same throughout the duration of your plan.
Before taking out equity release, you must receive advice from a qualified equity release adviser. It’s a regulatory requirement.
Our fixed advice fee of £1,299 is only payable upon completion, meaning you won’t be charged if you don't go ahead. This gives you the flexibility to explore your options at no cost, until you’re confident that equity release is the right choice for you.
Equity release is a lifetime commitment and isn't designed to be repaid early, if you do early repayment charges may apply.
Be sure to check the terms of your equity release plan to understand any potential early repayment charges.
ⓘ What's the total set-up cost?
The total average cost of fees when setting up equity release with Key is estimated to be around £2,549. Although not every application will incur the same charges. For example, with some plans, you may pay a lender’s application or survey fee. It's important you speak to an expert equity release adviser to find out what you'll pay before you proceed to release equity.
What factors determine how much I can release?
There are a range of factors which determine how much you could release. Some of the main ones to consider are:
The amount you release through equity release is not subject to tax.
However, depending on how you use the equity you release, there may be tax implications. For more information, read our equity release and tax guide.
How to reduce the costs of equity release?
Reducing the cost of equity release can help you maximise the benefits while minimising the financial impact over time. Here are three effective ways to keep costs down with a lifetime mortgage:
Benefits and drawbacks of equity release
Watch our video to find out more about the benefits and drawbacks of equity release.
Our equity release advice relates to Key's range of lifetime mortgages only.
Video transcript (pdf)
There are different types of equity release which help thousands of UK homeowners take control of their later life finances. Here are some useful links to see if equity release could be right for you:
For more information on your later life options, read our free, comprehensive guide today.
Key is a specialist, award-winning later life mortgage provider for the over 55s. We've helped over a million customers see if equity release was right for them. After we take the time to understand your needs, we'll recommend the right later life option for you.
Your other options with Key
Key offers alternatives to equity release such as a retirement interest-only mortgage or retirement repayment mortgage. If another product is more suitable, including home reversion, we'll refer you to a different adviser within Key Group to help. If you go ahead, you'll only be charged the same £1,299 advice fee you'd pay with us, even if their fee is usually higher.
Other options to think about
It's important to know your other options before going ahead with equity release. These include: downsizing, unsecured lending, using existing assets, or support from friends or family.
Page last updated: Tuesday 17 December 2024