Costs of entering into an equity release scheme

There are some other costs you may have to pay if you choose an equity release scheme. These could include the following.

• Completion, arrangement or application fees
  
  These are usually between £300 and £600 and cover administration costs. Some lenders and reversion companies refund these fees when the loan has been set up. You should ask your lender or reversion company about any costs you may have to pay later if you want to increase the size of your loan in the future.
  
• Valuation fees

For a lifetime mortgage the lender will need to value your property to make sure that it provides good security for the loan. For a reversion scheme, the company will need to value your property to see how much they are willing to pay you for the percentage of your home you sell to them, the valuation fee will depend on how much your home is worth, with higher charges for more expensive properties. For a £100,000 property, the fee is likely to be between £200 and £300. Some companies may refund this when the loan is completed.

• Solicitors' fees
  
  These are usually between £300 and £600 and cover the legal work carried out on your mortgage. You should ask your solicitor for a breakdown of the fees. You may have to appoint your own solicitor, rather than using the same one as the lender. You will have to pay your own and the lender's legal costs.
  
• Insurance
  
  You will need to take out buildings insurance for the period that the plan is in place. This will usually cost between £200 and £300 a year.
  
• Early repayment charges
  
  To cover the costs involved in setting up a lifetime mortgage, lenders may make a charge if you repay it early. A lifetime mortgage usually continues until you die so you may have to pay an early-repayment charge if you want to pay it off for any other reason.
  
• Mortgage intermediary's arrangement fee
  
  You may have to pay a fee to the person who arranges your equity release scheme. The FSA's rules say that all lenders and mortgage intermediaries who lend, advise on, or arrange lifetime mortgages must be authorised by them. If you are using the services of a mortgage intermediary who charges a fee, the charge must be clearly explained to you. Not all mortgage intermediaries charge a fee but those who do usually charge between 0.5% and 1.5% of the amount you are borrowing.