EQUITY RELEASE
Speak to an equity release adviser
No obligation to proceed.
Equity release will reduce the value of your estate and may affect your entitlement to means-tested benefits and your tax position.
What does equity release cost?
Potential costs can include interest on a lifetime mortgage, adviser fees, legal fees, valuation fees, arrangement or application fees, and possible early repayment charges. The exact costs vary according to the product, provider, adviser and individual circumstances.
Lifetime mortgage interest
Interest is charged on the amount borrowed and may be added to the loan if it is not paid.
Advice fees
An adviser may charge a fee for providing equity release advice.
Legal fees
You will normally need independent legal advice as part of the process.
Valuation fees
Your property will normally need to be valued, although whether a fee applies can depend on the product.
Arrangement or application fees
Some lifetime mortgage products may have arrangement, application or completion fees.
Early repayment charges
A charge may apply if a lifetime mortgage is repaid early, depending on the product and circumstances.
The cost of lifetime mortgage interest
Interest is charged on the amount borrowed. If interest is not paid, it is normally added to the loan. Future interest is then charged on the increased balance. This is compound interest, and the balance can therefore increase significantly over a long period. Actual rates depend on the product and circumstances.
You borrow
Interest is charged on the amount borrowed.
Interest is added
If the interest is not paid, it is added to the outstanding loan.
The balance increases
The amount owed becomes higher as interest is added.
Interest is then charged on the higher balance
Over time, this compounding effect can significantly increase the amount owed.
This is known as compound interest. The longer interest is added to the loan, the greater the potential effect on the outstanding balance.
An example of how interest can build up
This is a simplified illustration only and is not an indication of the rate or cost of any particular lifetime mortgage. It assumes the interest rate remains at 6% throughout and that no repayments are made.
£50,000 initially borrowed → approximately £160,357 after 20 years
ILLUSTRATION ONLY
£50,000 initially borrowed
6% fixed annual interest
No repayments
NOW
£50,000
Initially borrowed
5 YEARS
£66,911
Approximate balance
10 YEARS
£89,542
Approximate balance
15 YEARS
£119,828
Approximate balance
20 YEARS
£160,357
Approximate balance
What other fees might you pay?
Costs vary between advisers, solicitors, providers and products. Before proceeding, you should be told which costs apply to your circumstances.
Advice fee
Some advisers charge a fee for equity release advice. The amount and how it is charged should be explained before you proceed.
Legal fees
You will normally need independent legal advice as part of the equity release process.
Property valuation
Your property will normally need to be valued. Whether a valuation fee applies can depend on the provider and product.
Arrangement or application fees
Some lifetime mortgage products may have arrangement, application or completion fees.
Other potential costs
Additional costs may apply depending on your circumstances and the product selected.
Ask for a clear breakdown of all fees and charges before deciding whether to proceed.
Can you reduce the amount of interest that builds up?
Depending on the product, there may be ways to reduce the amount of interest that is added to a lifetime mortgage over time.
Pay some or all of the interest
Some lifetime mortgages allow regular interest payments. Paying interest rather than adding it to the loan can reduce the effect of compound interest.
Make voluntary repayments
Some products allow you to repay part of the amount borrowed without repaying the lifetime mortgage in full, subject to the product terms.
Use a drawdown facility
Rather than taking all the money at outset, some products allow further amounts to be drawn later. Interest is generally charged only on money that has actually been taken.
Product features, repayment allowances and restrictions vary. Repayments above any permitted allowance may result in an early repayment charge.
An adviser can explain which repayment and drawdown features may be available and how they could affect the overall cost.
Lump sum versus drawdown
Some lifetime mortgages provide all the money at outset, while others allow money to be taken in stages. This can affect how interest builds up.
Lump-sum lifetime mortgage
The amount you choose to borrow is released at the outset.
MONEY
Taken as one initial lump sum.
INTEREST
Interest is generally charged on the full amount borrowed from the outset.
MAY SUIT
People who need a larger amount of money immediately.
Drawdown lifetime mortgage
An initial amount is taken, with further money potentially available from an agreed facility later.
MONEY
Taken in stages when required.
INTEREST
Interest is generally charged only on money that has actually been drawn.
MAY SUIT
People who do not need all of the available money immediately.
TAKING £50,000
LUMP SUM — £50,000 taken immediately → interest charged on £50,000
DRAWDOWN — Only the amount actually taken → interest generally charged on that amount
Taking money in stages can potentially reduce the amount on which interest is charged, but drawdown availability, future withdrawals and interest rates will depend on the product and circumstances.
What about early repayment charges?
Repaying a lifetime mortgage early can sometimes result in an early repayment charge (ERC). How the charge works will depend on the particular product.
When might a charge apply?
An early repayment charge may apply if you repay some or all of the lifetime mortgage earlier than anticipated.
How is the charge calculated?
The way an early repayment charge is calculated varies between products. Charges may be fixed or calculated using another method set out in the product terms.
Can exemptions apply?
Some products may allow repayments without an early repayment charge in certain circumstances, subject to the terms of the plan.
Check the early repayment terms before proceeding
A lifetime mortgage can potentially remain in place for many years, so it is important to understand what could happen if your circumstances change and you later want to repay it.
An adviser can explain the early repayment terms of any product being considered, including any applicable charges and exemptions.
Why the total cost matters
The amount initially borrowed is only one part of the overall cost. How much is ultimately repaid can depend on the interest rate, how long the borrowing remains outstanding, fees and how the lifetime mortgage is managed over time.
Look beyond the initial borrowing
Two lifetime mortgages involving the same initial amount could have different overall costs depending on their interest rates, fees, product features, repayment choices and how long they remain outstanding.
An adviser can explain the potential costs and illustrate how the balance could change over time based on the options being considered.
AMOUNT BORROWED
How much is taken initially and, where applicable, through later drawdown.
INTEREST RATE
The rate charged on the outstanding borrowing.
TIME
How long the lifetime mortgage remains outstanding.
FEES
Advice, legal, product and other applicable costs.
REPAYMENTS
Any interest payments or voluntary repayments made during the term.
HOW MONEY IS TAKEN
Taking money as a lump sum or in stages can affect how much borrowing attracts interest.
TOTAL COST OVER TIME
The amount ultimately repaid will depend on the amount borrowed, interest charged, fees, any repayments made and how long the lifetime mortgage remains outstanding.
Questions to ask before proceeding
Before deciding whether to proceed, it can be helpful to understand both the immediate costs and how the lifetime mortgage could affect you in the future.
What interest rate will apply, and is it fixed for the life of the mortgage?
What advice, legal, valuation or product fees will I need to pay?
How could the outstanding balance change over time?
Can I make voluntary repayments or pay some or all of the interest?
Are there any early repayment charges, and when might they apply?
Can I take the money in stages rather than as one lump sum?
How could equity release affect the value of my estate?
Could it affect my entitlement to means-tested benefits or my tax position?
What alternatives to equity release should I consider?
Ask questions until you understand the implications
Equity release is a significant financial decision. Your adviser should explain the costs, features, risks and alternatives so that you can make an informed decision.
Alternatives to equity release →
Equity release costs and fees FAQs
Common questions about interest, fees and the overall cost of equity release.
How much does equity release cost?
What fees are involved in equity release?
How does interest work on a lifetime mortgage?
Do I have to make monthly repayments?
Can I pay the interest on a lifetime mortgage?
Is drawdown cheaper than taking a lump sum?
Are there early repayment charges?
Do I need to pay legal fees?
Does equity release reduce my inheritance?
How can I compare the total cost of different options?
Continue exploring equity release
Lifetime mortgages explained
Understand how the most common form of equity release works.
Read the guide →
How much equity can I release?
Understand some of the factors that can affect the amount available.
Read the guide →
Alternatives to equity release
Explore other ways you may be able to achieve your financial objective.
Read the guide →
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No obligation to proceed.
Equity release will reduce the value of your estate and may affect your entitlement to means-tested benefits and your tax position.
MortgageAdvice.co.uk is operated by Mortgage Website Limited (company number 17359328), registered office: 54 Sun Street, Waltham Abbey, EN9 1EJ. Mortgage Website Limited is an introducer and does not provide mortgage or equity release advice. We introduce customers to selected advisers who are appropriately authorised and regulated to provide the relevant advice. Mortgage Website Limited may receive a fee from the adviser or advisory firm for making an introduction. Your home may be repossessed if you do not keep up repayments on your mortgage. Equity release will reduce the value of your estate and may affect your entitlement to means-tested benefits and your tax position. © 2026 Mortgage Website Limited. All rights reserved.