Quick Answer
Setting up equity release typically costs £2,000–£3,500 in adviser, valuation, legal and arrangement fees, and those fees are usually added to the loan, so they compound alongside the interest. A £60,000 lifetime mortgage at a typical 5.5% AER grows to roughly £134,000 after 15 years. The setup fees are the small part; understanding the interest is what matters.
The true cost of equity release
Equity release lets homeowners aged 55 and over borrow against the value of their home, with the loan plus interest repaid when the property is sold, usually on death or moving into long-term care. Used carefully, it is a flexible way to fund later life. But the costs come in two very different sizes: setup fees you pay once, and interest that compounds for years.
Most people focus on the fees because they arrive first, as invoices and deductions. The interest is the cost that actually decides whether the plan was worth doing. This guide covers both, with current figures for 2026.
The fee breakdown
| Fee | Typical cost | Notes |
|---|---|---|
| Adviser fee | £500–£1,000 | Compulsory under FCA rules; sometimes waived if the adviser takes commission |
| Property valuation | £300–£800 | Depends on property value; some lenders offer free valuations |
| Solicitor (yours and the lender's) | £1,500–£3,000 | Must be a specialist equity release solicitor |
| Lender arrangement / product fee | £0–£600 | Often added to the loan; some products have no fee |
| Typical total | £2,000–£3,500 | Usually added to the loan rather than paid upfront |
None of these figures are fixed by law, they are market rates, and they vary by lender, property value and how complex your case is. A £400,000 flat in a standard block will cost less to value and convey than a Grade II listed cottage.
Fees added to the loan compound too
Almost every lender will let you add the setup fees to the loan. That feels free, no cash leaves your pocket, but the fees then sit inside the balance and accrue interest at the same rate as everything else.
£3,000 of added fees at a typical 5.5% AER grows to roughly £6,700 after 15 years. That is the real price of not paying them upfront, and it is why anyone who can comfortably pay fees from savings should usually do so.
Interest is the real cost
A lifetime mortgage charges interest monthly, and because you make no repayments, each month's interest is added to the balance and itself earns interest. This is "roll-up" compounding, and it moves fast.
A £60,000 lifetime mortgage at 5.5% AER with no repayments grows to approximately:
| Years | Balance |
|---|---|
| 5 | £78,400 |
| 10 | £102,500 |
| 15 | £134,000 |
| 20 | £175,000 |
After 20 years the interest owed is nearly twice the amount originally borrowed. That is not a trick, it is what 5.5% compounding does, but it is the number to stare at before signing. Run your own age, property value and rate through our equity release calculator to see the curve for your situation.
Two things soften the curve. First, making even small voluntary payments, many products allow around 10% of the loan per year penalty-free, dramatically slowing the roll-up. Second, a drawdown lifetime mortgage releases money in stages rather than one lump sum, so interest only accrues on what you have actually taken. For most people who do not need the whole amount at once, drawdown is meaningfully cheaper than a single lump sum.
Early repayment charges
Life changes, an inheritance arrives, you decide to downsize, a partner dies. Repaying early usually triggers an early repayment charge (ERC), typically 5%–8% of the amount repaid in the early years. Some products taper the charge over 5 to 10 years; others keep it flat for the life of the plan, which can make a repayment in year 10 expensive.
If there is a realistic chance you will repay early, tell your adviser before choosing a product. ERC treatment varies more between products than interest rates do.
Lifetime mortgage vs home reversion
This guide has focused on lifetime mortgages, the most common form of equity release, where you borrow against the property and keep 100% ownership until the plan ends. The alternative is a home reversion plan, where you sell all or part of the property to a reversion company in exchange for a lump sum or regular payments, and stay in the home rent-free.
Home reversions have no interest rate because there is no loan, the "cost" is the discount applied to your property's value, which can be substantial. Both routes are regulated, and both require advice. Our lifetime mortgage calculator compares the borrowing route in detail.
Ways to keep the cost down
- Use drawdown instead of a lump sum if you can, interest only accrues on what you have drawn (avoid releasing £80,000 to park it in a savings account).
- Pay fees upfront from savings if you have them, rather than adding them to the loan.
- Make voluntary repayments, around 10% of the original loan per year is typically allowed penalty-free, and even £100 a month holds the balance nearly flat at these rates.
- Compare adviser fees: some charge a flat £750, others take lender commission and charge you nothing; a whole-of-market adviser is worth the fee.
- Check the valuation and cashback incentives: lenders regularly run free-valuation or cashback offers that knock £500+ off the setup bill.
- Ask about fee-free remortgaging, if you already have an older plan at a higher rate, newer products may let you switch with legal and valuation fees paid.
The safety nets
Equity release in the UK has hard-won protections. Products from Equity Release Council members carry a no negative equity guarantee: you or your estate will never owe more than your home is worth. You also have the right to remain in your property for life, and the FCA regulates both lenders and advisers.
Those guarantees are the floor, not the ceiling of what you should expect. The decision still deserves a proper comparison of alternatives, downsizing, Pension Credit and other benefits, or simply budgeting differently. A good adviser walks through those before recommending a plan, and the advice itself is compulsory, see our equity release calculator page for the full picture.
Frequently Asked Questions
How much does equity release cost in total? Setup typically costs £2,000–£3,500: adviser fee around £500–£1,000, valuation £300–£800, specialist solicitor £1,500–£3,000 and lender arrangement fees £0–£600. The bigger cost is compound interest, a £60,000 lifetime mortgage at 5.5% AER roughly doubles to around £134,000 after 15 years.
Can equity release fees be added to the loan? Yes. Most lenders let you add adviser, valuation and legal fees to the loan instead of paying upfront. The trade-off is that the fees then accrue interest like the rest of the balance, £3,000 of added fees at 5.5% AER costs roughly £6,700 after 15 years of roll-up.
What interest rate will I pay on equity release? Typical lifetime mortgage rates run around 5%–6.5% AER depending on your age, loan-to-value and product type. Interest usually compounds monthly with nothing to pay until the plan ends, which is why the balance grows quickly. Our equity release calculator shows the effect on your own figures.
What happens if I repay my equity release plan early? Most plans apply an early repayment charge (ERC), typically 5%–8% of the amount repaid in the early years, often tapering over 5 to 10 years. Some products charge a fixed ERC that never reduces. If you expect to repay early, for example an inheritance, ask your adviser about lower-ERC or no-ERC products before you commit.
Will taking a lump sum affect my benefits? It can. Money released from your home counts as savings for means-tested benefits such as Pension Credit, where savings above £10,000 reduce entitlement. Always get benefits advice before releasing a lump sum, see GOV.UK on Pension Credit.
Is financial advice really compulsory for equity release? Yes. FCA rules require you to receive advice from a qualified equity release adviser before a lifetime mortgage completes, this is not optional. Advisers charge £500–£1,000, but they compare the whole market, check alternatives and confirm the plan is suitable. Start with the FCA and the Equity Release Council standards pages.
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