Can You Pay Back an Equity Release Loan Early?

Equity release schemes aren’t loans that are designed to be paid off as quickly as possible.

Instead, when the lender makes the agreement to give you the money in exchange for the equity in your home, they’re banking on you building up a large amount of interest to make their investment worthwhile.

You Can Repay Equity Release Early?

You can repay an equity release loan early but you'll need to pay extra charges, which can be as high as 15%. The longer you wait to repay the loan, the less you'll need to pay in extra charges.

Continue reading to get the full details.

Looking for other information on Equity Release? This guide has info on 'Can equity release be paid off early?' We have also writen extensively about:

• - Are equity release rates falling?
• - Are equity release schemes a good idea?
• - Is equity release a good or bad thing?
• - Can equity release be mis-sold?

We update all our guides regularly. If you are researching Equity Release and we haven't got an exact guide that helps you, keep coming back as we update daily.

Equity Release: The Cost of Repaying Early

Your early repayment charge for your equity release loan will be set out for you when you first sign your agreement, and it’s the responsibility of your solicitor to make sure you understand it before you agree to the loan.

A handful of lenders will set a fixed flat fee for cancellation, to keep thing as simple as possible. Some other lenders will instead have a varying cancellation fee that is tied to external market factors, meaning it could rise or fall depending on other financial indicators.

It may be that you wish to cancel, change your mind and then 12 months later find that the fee has shot up.

Equity Release: Early Repayment Charge Will Start High

However in most cases, the early repayment charge will start high, and then decrease annually. That’s because lenders will want to recoup as much money as possible and, if you’ve had your loan for a while, you’ll have built up significant interest already.

For example, say you borrowed £50,000 initially but a change in your circumstances meant that you wanted to end it after a year. You’d have to repay the £50,000, plus a year’s worth of interest, and then perhaps a 15% early repayment charge against the original amount, so an extra £7,500.

Over time, the rate may drop. So if you took that £50,000 out when you turned 55 but at age 70 you wanted to downsize your home, and you needed to repay your equity release early, you’d need to repay the £50,000, plus the 15 years of interest that had accrued, and then maybe a 1% repayment fee of £500.

Equity Release: Downsizing Your Home

Downsizing your home is one of the most common reasons to end an equity release loan early since you won’t have the same value property to guarantee repayment of the loan when you die.

However you may instead just have come into a better financial position, and want to protect your property to pass onto your loved ones when you do pass away.

We’ve got extensive guides on everything to do with equity release, so before you do anything else make sure to check out our pros and cons guide, or look over the eligibility criteria.

How Can Money Savings Advice Help You With Releasing Equity?

Here at Money Savings Advice, we have partnered with some of the UK’s leading Equity Release brokers. They have already helped thousands of people get the best Equity Release deal and they can do the same for you.

Choosing an independent adviser means they won’t recommend a scheme unless they are sure it is in your best interests. Their advice is also regulated by the FCA, which gives you an additional layer of protection.

If you would like to speak to one of these brokers who can provide you with a ‘whole market quote’ then click on the below and answer the very simple questions.