What do we mean by the cost of equity release?

There are three amounts to separate: your setup fees, the interest charged over time and the total eventually repaid. The final repayment includes the original money borrowed; it is not all interest.

These examples cover a lifetime mortgage, a loan secured against your home while you retain ownership. They do not apply to home reversion plans, which involve selling a share of your property. Our guide to equity release and its pros and cons explains the difference.

What could you owe after 5, 10, 15 or 20 years?

Illustrations only, not current rates or offers. AER means annual effective rate. Assumptions: £50,000 borrowed once, a fixed rate, no fees added, no repayments and no further borrowing. Figures are rounded to the nearest pound. Balance = £50,000 × (1 + annual effective rate)^years. The time periods are illustrations, not fixed mortgage terms.

Why does the amount owed increase?

With a roll-up lifetime mortgage, unpaid interest is added to your balance. Further interest is then charged on the larger amount. This is compound interest. At 6% AER, the first year’s interest on £50,000 is £3,000; without repayments, interest in the following year is charged on £53,000.

After 20 years, the illustrative £160,357 balance consists of the original £50,000 plus approximately £110,357 in interest. Lenders’ calculation methods vary; for example, Legal & General explains that its interest is calculated daily and added monthly. Always use your personalised illustration for the actual product figures.

What difference could paying £100 a month make?

Paying £100 a month can reduce the amount of interest that builds up, but it would not cover all the interest in this example. The balance would still grow. The comparison below uses the same £50,000 loan and 6% AER over 20 years.

Illustrations exclude fees and repayment charges. Interest compounds monthly at (1.06^(1/12) − 1), approximately 0.486755% a month, and payments occur at each month-end. The full-interest calculation uses the unrounded payment; £243.38 is its rounded display value. Total figures are rounded to pounds.

Paying £100 a month means paying £24,000 over 20 years. It reduces the remaining balance by about £45,344 compared with making no repayments. Of that reduction, £24,000 comes from your payments and about £21,344 is interest avoided. The “payments + balance” column makes that distinction clear; it is a cash total, with no adjustment for inflation or investment returns.

Paying all the interest keeps the balance at £50,000 in this model. You would still need to repay that capital when the mortgage ends. Repayments must be affordable alongside living costs and an emergency reserve, and permitted under the plan’s terms.

Use the My Later Life repayment calculator to explore different assumptions, then ask us for a personalised comparison. Calculator results are guidance, not a mortgage offer.

Which equity release fees should you check?

Ask for a written breakdown showing each charge, when it becomes payable and whether it is paid separately, deducted from the advance or added to the mortgage. MoneyHelper’s equity release guide identifies advice, legal, valuation and arrangement fees as costs to consider.

Advice fees

An adviser may charge for assessing your circumstances and arranging a suitable plan. Ask how the fee is calculated, when you pay it and whether the adviser also receives a payment from the lender. My Later Life’s advice fee depends on your circumstances; request the exact amount before proceeding.

Legal fees and expenses

You will need a solicitor to advise on the legal agreement. Ask whether the quote includes VAT and additional expenses, such as searches and registration costs, and whether more complex work could cost extra.

Valuation and lender fees

Check for valuation, arrangement or completion charges. Some products include incentives or cover certain costs, but compare the overall package: a lower upfront fee does not necessarily mean a lower long-term cost.

Does adding fees to the mortgage make it more expensive?

Yes, if interest is charged on those fees. As a hypothetical example, adding £2,000 of fees to a £50,000 advance creates a starting balance of £52,000. At 6% AER with no repayments, it would grow to about £166,771 after 20 years.

That is approximately £6,414 more than borrowing £50,000 alone: £2,000 in fees and £4,414 in interest on those fees. The £2,000 is an example, not a My Later Life fee quotation. All other assumptions match the first table.

Will a £50,000 mortgage give you £50,000 to spend?

Not necessarily. An existing mortgage normally needs to be cleared when the lifetime mortgage completes. Fees deducted from the advance also reduce the cash you receive. Tell your adviser whether you mean £50,000 of total borrowing or £50,000 left over after existing debts and costs.

Eligibility and the maximum advance depend on your circumstances and the property. Read who may qualify for a lifetime mortgage before planning around a particular amount.

Could drawdown equity release reduce the interest?

It may do so if you do not need all the money immediately. A drawdown lifetime mortgage allows an initial withdrawal and access to further funds under the agreed facility. Interest is charged on money withdrawn, rather than the unused reserve.

For example, if you need £25,000 now and may need another £25,000 later, compare taking £50,000 immediately with taking £25,000 first. Delaying the second withdrawal can reduce the time you pay interest on that money.

Later withdrawals may carry the interest rate available at that time, which could be higher or lower than your initial rate. Access is subject to the facility’s terms. Our equity release jargon guide explains drawdown and prevailing rates.

Can you repay equity release without a penalty?

Some repayments may be allowed without a charge, but the allowance and conditions depend on the plan. Exceeding the allowance or clearing the mortgage early can trigger an early repayment charge. Check the permitted amount, payment frequency, minimum payments and any exemptions before paying.

The Equity Release Council’s product standards include an ability to make repayments without charges, subject to the provider’s criteria. That does not mean unlimited repayment is free, or that every lifetime mortgage has identical terms.

How could equity release affect your inheritance?

The outstanding mortgage must be repaid from your resources or estate, reducing what is available for beneficiaries. The effect depends on the debt, property value and other assets. House prices can fall as well as rise; future growth should not be relied on to cancel out borrowing costs.

For products meeting the Council’s standards, the no-negative-equity guarantee limits what you or your estate must repay to the property’s sale value after reasonable selling costs, provided its conditions are met. It does not guarantee an inheritance. Read what happens if you inherit a house with equity release for the family’s perspective.

When might another option be more suitable?

Compare using savings while keeping an emergency fund, downsizing after moving costs, and other mortgages if affordable. A retirement interest-only mortgage normally requires ongoing interest payments and an affordability assessment. Our equity release versus RIO mortgage comparison explains the different commitments.

Also consider benefits entitlement, future care needs and plans to move. If money is needed for problem debt, seek free debt advice before securing more borrowing against your home. Our guide to the long-term impacts of equity release explores the wider decision.

How My Later Life can help you compare the cost

At My Later Life, we can assess your needs and compare suitable lifetime mortgage options available through our service. The aim is to find an approach that fits your circumstances, including considering alternatives where equity release is unsuitable.

Ask us to show you the cash you would receive, all fees, projected balances and repayment choices side by side. A useful comparison also considers drawdown facilities, early repayment charges and what happens if your circumstances change.

To discuss releasing £50,000, contact My Later Life or call 0207 100 4255. We can explain the next steps and provide a personalised illustration. Our step-by-step equity release guide explains how the process works.

Frequently asked questions about £50,000 equity release

Do I have to make monthly payments?

A standard roll-up lifetime mortgage usually does not require monthly payments. Some lifetime mortgage products do require payments, so check the specific contract. Optional repayments may be possible within the lender’s rules.

Can I stop the balance increasing?

Paying all interest as it is charged can keep the balance level if no fees or additional borrowing are added. In our £50,000 example at 6% AER, that is approximately £243.38 a month. Paying only £100 slows the growth but does not stop it.

Is the money released tax-free?

The money received from a lifetime mortgage is generally tax-free because it is borrowing. What you do with it can affect your tax position and entitlement to means-tested benefits. Check the implications before taking a lump sum.

When is a lifetime mortgage repaid?

It is normally repaid when the last borrower dies or permanently moves into long-term care, usually through a property sale. Other repayment events and conditions can apply, including selling or breaching the agreement.