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Equity Release · 7 min read

What equity release really costs

The set-up fees are the small part. The cost that decides whether equity release was a good idea is the interest that compounds quietly for the next twenty years.

Last updated: August 2026

Key takeaways
  • ✔ Set-up costs typically total £1,500–£3,000 across advice, legal, valuation and arrangement fees
  • ✔ Rolled-up compound interest is by far the largest cost over the life of the plan
  • ✔ Adding fees to the loan avoids paying up front but makes them compound too
  • ✔ Drawdown plans cost less than lump sums because interest accrues only on what you draw
  • ✔ Most modern plans allow voluntary repayments of around 10% a year with no charge
  • ✔ Early repayment charges can be significant, and gilt-linked ones are unpredictable

The set-up fees

FeeTypical rangeWhat it is
Advice fee£0 – £2,000Charged by the equity release adviser. Some charge a flat fee, some a percentage, some are paid by the lender instead.
Valuation fee£0 – £600A survey of your property to confirm its value. Frequently waived by the lender as an incentive.
Solicitor's fee£800 – £1,500You must take independent legal advice. This is a requirement of the process, not an optional extra.
Lender arrangement fee£0 – £995The lender's product fee. Can sometimes be added to the loan, which means it accrues interest too.
Buildings insuranceOngoingRequired as a condition of the plan, as with any mortgage.

Ranges vary between lenders and advisers, and competitive plans often waive one or more of these outright. Ask for a written breakdown of every fee before you commit — a plan with a slightly higher rate and no fees can easily beat a headline-rate plan that charges for everything.

The cost that actually matters: rolled-up interest

On a standard lifetime mortgage you make no monthly payments. The interest is added to the balance each year, and the following year's interest is charged on the larger total. That is compounding, and over the decades a plan typically runs it dominates every other cost.

Illustration. £60,000 released at 6.0% fixed, with no repayments made:

After 5 yearsabout £80,000
After 10 yearsabout £107,000
After 15 yearsabout £144,000
After 20 yearsabout £192,000
After 25 yearsabout £257,000

Illustrative only, at a constant 6.0% annual compounding and ignoring fees. Your own figures depend on the rate you are offered and how long the plan runs.

Whether that matters depends entirely on what happens to the property value alongside it. If the house appreciates faster than the balance compounds, equity is preserved. If it does not, the estate's share shrinks — which is why the No Negative Equity Guarantee on Equity Release Council plans matters: your estate can never owe more than the property is worth.

Get a full cost breakdown before you commit

A Charles Frank Finance adviser will show you the fees and the long-term interest projection. No obligation.

Prefer to talk? Call 029 2167 0060

Four ways to cut the total cost

  • Choose drawdown over a lump sum. Interest accrues only on what you have actually taken. Reserving £40,000 and drawing £20,000 now costs far less over twenty years than drawing all £60,000 today.
  • Release the minimum you need. Every extra £10,000 taken early compounds for the whole life of the plan.
  • Use the voluntary repayment allowance. Most plans permit around 10% of the borrowed amount to be repaid each year without charge — enough to hold the balance flat if you can cover the interest.
  • Consider an optional payment plan. Paying some or all of the interest monthly stops or slows the roll-up entirely, and you can stop paying at any time without penalty.

Early repayment charges

Lifetime mortgages are designed to run for life, so repaying early is penalised. There are two structures, and the difference between them is worth understanding before you sign:

  • Fixed / defined charges — a stated percentage that reduces over a set period, for example 5% falling to 0% over ten years. Predictable, and easy to plan around.
  • Gilt-linked charges — calculated by reference to gilt yields at the time of repayment. The charge could be nil, or it could be large; you cannot know in advance.

Most plans also waive the charge entirely in certain circumstances — commonly on death, on moving into long-term care, and in some cases on the death of the first borrower of a couple. Check which waivers apply, because they are the situations in which the plan is most likely to end.

Costs that are easy to miss

  • Lost means-tested benefits. Releasing cash can reduce or remove entitlement to Pension Credit or Council Tax Reduction. For some households this is a larger real cost than the fees.
  • Reduced inheritance. The compounding balance comes out of what your beneficiaries receive.
  • Property upkeep obligations. Plans require the home to be kept in good repair, which is a continuing cost.
  • Fees added to the loan. Convenient, but they compound at the same rate as everything else.
  • Porting restrictions. Moving to a property the lender will not accept can force a repayment, and with it an early repayment charge.

Frequently asked questions

How much does equity release cost to set up?
Set-up costs typically total between £1,500 and £3,000, covering advice, legal work, valuation and any lender arrangement fee. Some lenders waive the valuation and some advisers are paid by the lender, so the range in practice is wide — always ask for a full breakdown before proceeding.
What is the biggest cost of equity release?
Not the fees — the rolled-up interest. Because nothing is repaid until the plan ends, interest compounds on interest for the whole life of the loan, and over twenty years or more it can add more to the balance than the amount originally released.
Can I add the fees to the loan?
Usually yes, and it is a common choice because it avoids paying anything up front. It is also the more expensive route: any fee added to the loan attracts compound interest for as long as the plan runs, so a £995 arrangement fee can cost several times that by the end.
What are early repayment charges on equity release?
A charge for repaying some or all of the loan before the plan ends naturally. They can be substantial in the early years — commonly on a sliding scale over ten to fifteen years, and on some plans linked to gilt yields, which makes the amount unpredictable. Fixed, defined charges are easier to plan around.
Can I repay some of the loan without a charge?
Most modern plans that meet Equity Release Council standards allow voluntary partial repayments — commonly up to 10% of the amount borrowed each year — without an early repayment charge. Using that allowance is the single most effective way to control the compounding.
Are equity release interest rates fixed?
On a lifetime mortgage the rate must be fixed for life, or if variable it must be capped, under Equity Release Council standards. That means the rate agreed at the outset is the rate that compounds — it will not rise later, but nor will it fall if market rates do.
How can I reduce the total cost?
Take a drawdown plan rather than a lump sum so interest accrues only on what you have actually drawn; release the smallest amount that meets the need; make voluntary partial repayments or pay the interest monthly if you can afford to; and compare rates across the market rather than accepting the first offer.

Related guides

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Lifetime mortgages and home reversion explained in plain English.

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Lifetime mortgage vs retirement interest-only

Two ways to borrow in retirement, and how to tell which one fits.

See the full cost before you decide

A regulated equity release adviser will give you a personalised illustration showing every fee and the projected balance — no obligation.

Explore equity release →
Important: This guide is for information only and does not constitute financial advice. Fee ranges and the interest projection are illustrative and will differ from any offer made to you. Equity release will reduce the value of your estate and may affect your entitlement to means-tested benefits. To understand the features and risks, ask for a personalised illustration. CleverCompare is an introducer appointed representative of Charles Frank Finance Limited, which is authorised and regulated by the Financial Conduct Authority.
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