Keeping the initial equity release set up costs down to a minimum will be of great benefit in maximising the gross release from the lender… & in turn your pocket.
It will also have an immediate impact on the APR (annual percentage rate) of the equity release scheme in that the lower the set up costs, the lower the APR. Traditionally, there are four main associated costs involved: -
- Valuation Fee
- Lenders Application Fee
- Solicitors Fees
- Adviser Fee
These will be discussed in turn & assistance given on where to look for potential savings.
- Valuation Fee – paid upon application & can vary significantly from lender-to-lender.
The fee as with any mortgage is directly related to the property value & can vary from a percentage of the property value to a banding system. One area of savings here would be in the banding system. First establish what the bands are from the potential equity release lender & ensure that you have not placed your property value into a higher band than required. Dropping to the one level below can save at least £30 – £100.
However, bear in mind the valuation of the property will affect the maximum release so don’t jeopardise this figure if you are looking for as much as possible. The biggest savings you can make is with a free or subsidised valuation which some independent brokerages like Equity Release Supermarket can obtain. Certain lenders will make these special offers from time to time & would result in NO upfront costs being incurred.
- Lenders Application Fee – these are usually fixed no matter the size of the release or value of the property.
Some home reversion companies have no fee, as this is accounted for in the full or partial transfer of ownership. Lifetime mortgages application fees however can vary from £500 up to £695. Again, special offers can be made by lenders or even cash-backs can be obtained to reduce the net costs overall.
- Solicitors Fees – due to the fact the solicitor can be selected, considerable savings can be made here.
Local or family solicitors can be contacted & a quote for equity release conveyancing requested. Borne within the quote would be the solicitors flat fee & any disbursements including VAT. Consider obtaining several quotes from solicitors or take the recommendation of your independent adviser as they may have special fixed cost arrangements with solicitors from ERSA (Equity Release Solicitors’ Alliance).
*Equity Release Supermarket has a fixed fee arrangement of £395 + VAT & disbursements with a leading equity release legal firm.
- Advice Fee – dependent upon which brokerage advice is being sourced will determine how much the adviser is charging.
Care should be taken here. Fees of £1495 can be levied for taking out the same equity release plan as another brokerage charging only £595! Some companies will also charge an upfront fee, some will offer an initial consultation free of charge. Establish with the adviser how they are remunerated & shop around if you feel a better deal can be found elsewhere.
In summary, considerable savings can be made by conducting in depth research & dealing with a specialist independent firm of equity release advisers such as Equity Release Supermarket. Find out more about our fixed equity release advice fees.
If you have any queries regarding equity release fees & costs, please contact Mark Gregory on 0800 678 5159 or email [email protected].