Will Equity Release cost alot?
Equity release is an increasingly popular way for homeowners over 55 to unlock tax-free cash from the value of their property without having to sell or move. But before committing, it’s essential to understand the true cost of equity release — not just financially, but in terms of the long-term impact on your estate and future options.
In this article, we’ll break down the main costs associated with equity release, including interest rates, fees, and how these costs are managed — helping you make a fully informed decision.
The Main Cost: Interest Accumulation
The primary cost of equity release, especially with a lifetime mortgage (the most common type), is the interest that accrues over time. Unlike traditional mortgages, there are typically no monthly repayments — instead, the interest is “rolled up” and added to the loan balance.
Because interest compounds, the amount you owe can increase significantly over time. For example, a loan of £50,000 at an interest rate of 7% could grow to over £98,000 after just 10 years, unless interest is repaid during the term.
That said, many modern equity release products now offer optional interest payments or interest-serviced plans, giving you flexibility to reduce the cost if you choose to.
Typical Interest Rates
Interest rates for equity release are typically higher than those for standard residential mortgages, as they reflect the long-term nature of the loan and the absence of monthly repayments.
As of mid-2025, equity release interest rates generally range between 6% and 9%, depending on several factors, including:
- Your age (older applicants may access more favourable terms)
- The loan-to-value ratio (how much equity you’re looking to release)
- The features of the plan (such as inheritance protection or fixed early repayment charges)
While 6% may be available for those with lower loan-to-value requirements or limited product features, plans with greater flexibility and protection often fall closer to 8% or 9%. Using a whole-of-market adviser helps ensure you find the most suitable and competitive product for your needs.
Additional Fees to Consider
In addition to interest, there are a few upfront and professional fees to be aware of:
- Advice Fees: Some advisers charge a flat fee or a percentage of the loan (e.g. 1–2%), though others may offer free advice and earn a commission from the lender.
- Lender Fees: Valuation fees, application fees, or arrangement fees may apply depending on the lender.
- Legal Fees: You’ll need to pay for independent legal advice, usually around £500–£1,500.
- Solicitor Disbursements: These are standard property-related checks like land registry searches. Please be aware – If you have a complex case, the solicitor may charge an additional fee – An example of this may be where they have to update the title.
Early Repayment Charges (ERCs)
If you decide to repay your equity release plan early — for example, if you move home or come into unexpected money — you may face an early repayment charge. These vary widely between products, from fixed-term penalties to percentage-based sliding scales.
Although designed to be in place for your lifetime, many modern plans now include flexible features like downsizing protection or fixed early exit terms to make this more manageable, as circumstances can change over time.
The Bigger Picture: Long-Term Cost to Your Estate
Because equity release reduces the value of your estate, it will likely impact how much you leave behind to loved ones. Some plans allow you to ring-fence a portion of your home’s value to guarantee an inheritance, although this may reduce the amount you can borrow.
It’s also important to understand how equity release might affect any means-tested benefits, as receiving a large lump sum could alter your eligibility.
How Retirement Solutions Can Help
At Retirement Solutions, we’re here to guide you through the real costs of equity release in a way that’s clear, honest, and completely tailored to your situation. As a fully independent advice firm we search the entire market to find you the best possible deal — with transparent fees and no pressure.
We’re proud to be rated Excellent on Trustpilot, with hundreds of 5-star reviews from clients who value our friendly, informative service. Whether you’re just exploring your options or ready to move forward, we’ll help you understand the true cost of equity release — and whether it’s right for you.
