Most websites go vague at exactly this point. Here is the straight version.
There are three separate costs, and they are not the same thing. Advice, lender and solicitor. Two of them you can see up front. One of them, the interest, is the one that actually matters over time, and it is the one people understand least.
1. Our advice fee
A maximum of £1,495, and only if your case completes.
If you talk to us and decide not to go ahead, you pay us nothing. There is no charge for the initial conversation, no charge for looking into it, and no charge for deciding it is not for you.
That last part happens more often than you might think. Craig will tell you when equity release is not the right answer, and when that happens the work he has already done costs you nothing.
2. Lender and solicitor fees
These belong to other people, not to us, and they vary by lender and by case.
You will normally be looking at a valuation of your property, the lender's own arrangement or application fee, and your solicitor's costs. Some lenders absorb some of these, some do not. Some plans have no lender fee at all and a slightly higher rate instead, which can work out better or worse depending on how long you keep the plan.
You get told the exact figures for your case in writing before you commit to anything. Nobody should ever ask you to proceed on a vague number.
You must use a solicitor. That is not us being cautious, it is a requirement, and it exists to protect you.
3. The interest, which is the one that really counts
This is where equity release is genuinely different from a normal mortgage, and where the real cost sits.
On a standard lifetime mortgage you make no monthly payments. The interest is added to what you owe. Next year's interest is then charged on the new, larger balance. That is compounding, and over twenty years it does a great deal of work.
A rough illustration. Borrow £50,000 at 6% with nothing paid back, and after ten years you would owe roughly £89,000. After twenty, roughly £160,000. Same loan, untouched.
That is not a reason to avoid equity release. It is the reason to borrow only what you actually need, and to know that you have options.
You are not obliged to let it roll up
This is the bit that has changed most, and plenty of people still do not know it.
Modern plans let you pay some or all of the interest if you want to, monthly or ad hoc, with no penalty. Pay the interest each month and the balance does not grow at all. Pay some of it and it grows more slowly. Pay none and it rolls up as above. Your choice, and you can change your mind.
Most plans also include a drawdown facility. You take what you need now, leave the rest sitting in an agreed reserve, and only pay interest on what you have actually taken. If you need £30,000 now and might want more in five years, drawdown usually costs you far less than taking the lot today. There is no set-up charge each time you draw from the agreed facility.
What the rate depends on
Your rate depends on your circumstances, your property and the lender, so nobody can quote you a real one without knowing your case, and you should be wary of anyone who tries.
One thing worth knowing, because it confuses people who follow the news: later life lending rates are not tied to the Bank of England base rate. They tend to track the 15 year gilt yield, because most of the money behind these products comes from pension funds. So when you hear the Bank has cut rates, equity release rates do not necessarily move with it.
What you can never be charged
Every plan we arrange carries a no negative equity guarantee. However long you live, whatever happens to house prices, you and your family will never owe more than the property sells for. The debt cannot outgrow the house and it cannot be passed on.
Not sure how any of this applies to your own circumstances? Craig is happy to talk it through, free and with no obligation.
The honest summary
- Our fee: maximum £1,495, only on completion, nothing if you do not proceed
- Lender and solicitor: varies, quoted to you in writing before you commit
- Interest: the real long term cost, and largely within your control depending on whether you pay it, part-pay it, or let it roll up
- The cap: you can never owe more than your home is worth
If you want the actual numbers for your situation rather than the general shape of it, that is a conversation.
Book a call with Craig or call 0113 403 5584.
