How much does it cost to set up?

What is the cost of setting up an equity release plan?

Under the terms of your Lifetime Mortgage, the rate of interest that will be charged on your loan will either be fixed, or it will be variable, in which case there will be a “cap” (upper limit) on the amount that can be charged at any time.  If the rate is fixed, it will be fixed each time you withdraw funds from your plan.  Over time, therefore, you could have several amounts of money which you have released at different times, and each would be subject to a different fixed rate of interest, which would then be added to the total amount which you have borrowed. You will not have to pay back any of this money until your plan comes to an end and your property is sold or you choose to repay the loan.  At the time you take out the plan you may however be asked to pay a number of other fees to cover the costs of setting up the plan.  They will include fees payable to:

  • The Provider which is financing your plan.  These may be described as “application” or “administration” fees;
  • Your Adviser, who will carry out detailed research into the options and recommend the most suitable plan from the range available, followed with a written report containing recommendations and a personalised Key Facts Illustration (KFI). Should you wish to proceed, your adviser will arrange all of the required paperwork with the provider and handle things through to eventual completion and release of the funds;
  • Your Solicitor, for giving you independent advice on the plan to help you understand how it will work, and for carrying out the necessary conveyancing (legal) work; and
  • The surveyor (valuer) who will inspect your property in order to give the provider an independent estimate of its value at the time you take out the plan.

Some firms may not charge fees in all of these categories and others may structure their plans so that they offer cash-backs in order to balance the cost for you.  You will need to research the market thoroughly to ensure that you find an option which suits you.  The level of fees may also vary between firms, clients will always incur own solicitor costs, but some adviser firms don’t charge any fee and neither do some providers.