Equity Release Associated Costs Explained

There are a number of reasons you may decide that you want to repay your equity release loan early. Read on to find out what those may be, and the likely charges you’ll face to do so.

What Are the Equity Release Early Repayment Charges?

Equity release loans have high early repayment charges, normally around 15%. These will usually decrease over time, so that the longer you've made repayments the smaller a charge you'll have to cancel.

You can usually repay your equity release loan early, but you’ll need to pay extra charges to do so. These charges typically decrease, the longer you wait to repay it.

Continue reading for the all details about Equity Release loan early repayments.

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Equity Release: Reasons to Repay Early

When you take out an equity release scheme loan, you won’t be expected or even able to make regular payments to clear it while you’re still alive and living in your home.

Instead, the loan accrues interest until you move into full-time care or die, and is then repaid from your estate, usually with the sale of your home.

As it’s secured against your home, you need to make sure your property retains its value. This leads onto one of the more popular reasons for people wishing to repay their equity release loan early – if you change your mind about your circumstances and decide to downsize your home.

If you want to move home, you can transfer your equity release scheme as long as the property has equivalent value. If it doesn’t, then you won’t be able to move until your loan is repaid.

The other reason may just be that you’ve come into some money – perhaps an inheritance from another loved one, or investment has matured. If you find yourself with a large sum of disposable cash, you may find that it’s beneficial to pay off the loan and stop adding interest, so that your estate retains its full value when you do pass away.

Equity Release Early Repayment Charges

Your equity release loan early repayment charges will depend on the lender, but you should be made aware of them when you first take out the loan. Any charges including early repayment must be obvious, and it’s your solicitor’s role to make sure you understand them. So, if you do decide to repay the loan early, the fees shouldn’t come as a surprise.

Some lenders charge a flat cancellation fee, usually a percentage of the value of the loan. Other lenders maybe a little more complex, with a fee that varies depending on external financial factors tied into their lending terms.

What’s most common is an early repayment fee that declines over time. Basically the longer you let the interest build on your loan, the more money due to the lender, and so the less they’ll ask you to pay on top in order to cancel early. For example, your loan may have a 15% early cancellation fee when you first take it out, but over time this may decrease by 1% a year. After 14 years you’d only need to pay a 1% cancellation fee. It’ll usually never drop below 1%.

Read more about equity release loans with our further guides, and if you want to know more about how an equity release loan could work for your circumstances

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.