With any financial transaction, there are associated costs, and equity release fees can reach substantial amounts; however, there are strategies for minimising equity release setup costs.

The average total setup costs range between £1,500 and £3,000, typically payable upon completion of your equity release plan.¹

EveryInvestor's experts specialise in equity release and later-life mortgages, providing reliable information and guides just like this. Let the team assist you in reducing the costs of your equity release mortgage.

Read on to discover effective strategies for minimising these expenses...

What Are the Equity Release Options Available in the UK?

The 2 main options available in the UK are lifetime mortgages and home reversion plans.

A lifetime mortgage allows you to borrow against your home while retaining ownership, with repayment typically made when you pass away or enter long-term care; a home reversion scheme involves selling a share of your property in exchange for a lump sum or regular income while retaining the right to live in it.

Though equity release allows retiree homeowners to unlock the value of their property, proving particularly useful for boosting retirement or covering unexpected expenses, professional financial advice is always recommended before proceeding.

How Can Professional Equity Release Advice Help You Save on Setup Costs?

Professional equity release advice can help you save on setup costs by identifying lenders with lower fees, ensuring you choose the most cost-effective plan and that your arrangement is financially efficient and tailored to your needs.

Equity release setup costs, including advice fees, valuation charges, and legal expenses, can vary significantly between providers, and a qualified adviser can compare options, highlight hidden charges, and recommend fee-free deals where available.

They can also help you avoid costly mistakes, such as early repayment penalties or unsuitable plans.

3 Tips to Reduce Your Overall Equity Release Setup Costs

The best tips to reduce equity release set-up costs include receiving professional advice and shopping around for the best and most economical plans. 

Here's what you need to do:

Tip #1. Get Professional Equity Release Advice

Although it is important to do your own research, obtaining professional equity release advice can save you a significant sum.

An independent financial adviser (IFA) who is not tied to a specific product can provide impartial advice on different equity release plans and their costs.

Tip #2. Shop Around for a Good Plan and Provider

Shopping arpund for equity release plans and providers is essential, as costs, interest rates, and features can vary significantly; doing this ensures you secure a plan that offers the best value while meeting your financial needs.

The Equity Release Council (ERC) is a useful resource for finding reputable providers that adhere to strict consumer protection standards and rules and regulations, and choosing an ERC-approved provider can give you peace of mind.²

Taking the time to explore different options can help you avoid unnecessary costs and secure a better financial outcome.

Tip #3. Review All Regulated Plan Options

The Financial Conduct Authority (FCA) regulates the two types of equity release plans - lifetime mortgage and home reversion - to ensure greater consumer protection.

You can research the regulations governing both in the FCA Handbook.³

The regulations will provide you with a clearer understanding of the different kinds of plans and the costs involved, ultimately saving you money.

What Are the 6 Standard Costs of Equity Release Setup and How To Reduce Them?

There are six standard costs involved in all forms of equity release plan, but with some clever thinking, there are ways to reduce them.

Cost #1. Property Valuation Fees

Property valuation fees are charged by the equity release provider to determine the current value of your property. 

The amount charged will vary and could be impacted by the value of your property.⁴

Cost #2. Providers’ Application Fees

Providers’ application fees cover the costs of processing your application. 

Look for a provider offering a low or no application fee to reduce costs.

Cost #3. Funds Transfer Fees

Fund transfer fees cover the costs of transferring your released equity to your solicitor and then finally on to you.

What Are the Fund Transfer Costs and How To Reduce Them?

Fund transfer fees are charged for moving funds from your equity release provider to your chosen account. These fees can vary between providers, and it is essential to understand the terms and conditions associated with fund transfers. To reduce these costs, consider consolidating funds or opting for providers that offer competitive transfer rates.

Cost #4. Arrangement Fees

Arrangement fees cover the costs of setting up the equity release plan. 

Researching this item will give you a clearer picture of what different providers charge.

How To Negotiate or Avoid Arrangement Fees in Equity Release?

Arrangement fees cover the administrative costs of setting up an equity release plan and can vary significantly between providers.

Whilst it may not always be possible to avoid arrangement fees entirely, you can often negotiate with your provider for reduced fees or explore options with lower upfront costs. Be sure to ask about any potential waivers or discounts available.

Cost #5. Legal Fees

Legal fees are applicable because the Equity Release Council standards require all borrowers to consult an independent solicitor to protect their interests.

The cost depends on the work involved, such as registering your title or transferring the property into joint names.

Your solicitor works for you, so you can choose who to use and therefore opt for one with lower fees.

Cost #6. Broker Fees

You may need to pay a fee if you decide to use an independent broker to find the best equity release deal. 

Many independent brokers do not charge a fee but claim commission from the equity release provider.

Others will only charge a flat fee if you proceed with the deal.

3 Tips to Help Lower Common Maintenance Fees for Equity Release

Besides the set-up costs linked to your equity release plan, there are some other payments to consider once your equity release plan is up and running.

Tip #1. Annual Administration Charges

Annual administration charges are ongoing fees your provider charges for managing your plan. 

Some providers offer low administration charges or no charges at all, so it is worth shopping around.

Tip #2. Monthly Payments

Making monthly interest payments to reduce the overall loan amount is now standard practice for many equity release plan holders.

This will reduce the costs of your equity release plan in the long term because it reduces the effects of compound interest.

Tip #3. Early Repayment Charges

Early repayment charges are applied if you choose to end your equity release early by paying it off.

The interest on your equity release plan is calculated based on your plan ending when you pass away or go into long-term care.

By repaying it early, you deny your provider that projected income, so they will likely impose penalties.

How To Minimise or Avoid Early Repayment Charges in Equity Release?

Early repayment charges are incurred if you decide to repay your equity release plan earlier than expected. To minimise or avoid these charges, carefully consider the terms of your agreement and explore options with flexible repayment schedules.

Additionally, seek advice from a qualified financial advisor to understand the implications of early repayment on your specific plan.

How To Minimise Ongoing Costs?

Annual administration charges are ongoing fees associated with maintaining your equity release plan. To minimise these costs, consider opting for providers with competitive administration charges or exploring options with flexible fee structures. Regularly review your plan to ensure you are not paying for services you no longer need.

Frequently Asked Questions about Minimising Equity Release Setup Costs

Final Thoughts on Minimising Equity Release Setup Costs

To obtain the most favourable equity release plan, it is essential to consider the typical expenses involved, including property valuation fees, solicitor's fees, and monthly maintenance costs, and how to decrease them. 

Take the time to compare rates, negotiate fees, and seek professional advice to minimise costs and achieve the most favourable outcomes.

By exploring various techniques to minimise equity release set-up costs, you can secure the best possible deal and maximise the benefits of your equity release plan.