How do you compare equity release rates?

The best way to compare equity release rates is to look at more than the headline interest rate.

When comparing lifetime mortgages, you should consider:

• The interest rate
• How much you want to release
• The amount of interest that could build up over time
• Any arrangement, advice or other fees
• Drawdown facilities
• Voluntary repayment options
• Early repayment charges
• Inheritance protection
• The ability to move home
• The lender's eligibility criteria

A lower headline interest rate does not automatically mean that a particular lifetime mortgage will be the most suitable option for you.

How much equity could you release?

Before comparing individual equity release rates, it can be useful to understand how much you might actually need to borrow.

The amount you could potentially release depends on factors such as your age, property value, outstanding mortgage, health and the lender's criteria.

Our equity release calculator can give you an initial indication of how much you may be able to release.

The calculator provides an indication only. It is not a personal recommendation or confirmation that a particular equity release product will be available to you.

Why use a whole-of-market equity release broker?

There are a lot of companies offering equity release, and it can be difficult to know where to start.

You could spend hours searching online, looking at different lenders, comparing advertised interest rates and trying to work out which products you might actually qualify for.

The problem is that not every lender offers the same products, rates or lending criteria.

A rate you see advertised online may not necessarily be available for your age, property, borrowing requirement or the features you want.

That's where a whole-of-market equity release broker can make the process easier.

We do the comparison work for you

My Later Life is a whole-of-market equity release broker.

Rather than you having to approach individual lenders yourself, we can research the suitable options available through our panel and compare them based on your circumstances.

This can save you the time and effort of contacting multiple providers and trying to compare different products yourself.

Our aim isn't simply to find a headline rate. We look at the wider picture and explain the differences between the suitable options.

Why does whole-of-market equity release matter?

Imagine you find a lifetime mortgage advertised at an attractive interest rate.

It might look like a good option.

But what if that lender doesn't accept your particular property?

Or you cannot borrow the amount you need?

Or the plan doesn't provide a feature that is important to you?

Or another suitable lender offers a product with features that better fit what you're trying to achieve?

This is why comparing the right products is more important than simply finding the lowest advertised rate.

A whole-of-market broker can do much of the research for you, explain which options may be available and help you understand the differences between the plans.

Which equity release lenders do we compare?

Different lenders have different lending criteria, interest rates and product features.

Depending on your circumstances, we compare suitable plans from providers including:

We compare the relevant options available when we look at your circumstances rather than relying on an old list of rates.

What are the current equity release rates?

There isn't one single equity release interest rate available to everyone.

Lifetime mortgage rates change over time and the rate available to you will depend on the lender, the product and your individual circumstances.

Some providers advertise rates from a particular percentage, but an advertised rate should not be treated as a guaranteed personal quotation.

Your own rate can be affected by factors such as:

• Your age
• The age of the youngest applicant if you are applying jointly
• Your property value
• The amount you want to release
• Your loan-to-value
• The type and construction of your property
• Your health and lifestyle
• Whether you want a lump sum or drawdown facility
• The features you require from the plan

For this reason, a useful rate comparison should be based on the plans you are actually eligible for rather than simply comparing the lowest number you can find online.

Does your age affect the equity release rate?

Yes, your age can affect the plans available to you.

Lifetime mortgages are commonly available to homeowners aged 55 and over, although individual lenders have their own eligibility requirements.

For joint applications, lenders will normally use the age of the youngest applicant when assessing how much can be released.

Age can affect more than the amount you can borrow. It can also influence which products and rates are available.

How does loan-to-value affect equity release?

Loan-to-value, usually shortened to LTV, is the amount you borrow compared with the value of your property.

For example, if your home is worth £400,000 and you want to borrow £50,000, your LTV would be 12.5%.

If you wanted to borrow £150,000 against the same property, your LTV would be 37.5%.

The amount you want to borrow can affect the plans available to you and the rates that may be offered.

This is one reason why it can be worth thinking carefully about how much you actually need to release.

Does your health affect equity release?

It can.

Some lifetime mortgage providers use medical or lifestyle information when assessing an application.

If you have certain health conditions or lifestyle factors, enhanced terms may be available in some circumstances.

Your adviser can explain what information is relevant and how it may affect the options available to you.

Is the lowest equity release rate always the best rate?

It is tempting to search for "the lowest equity release rate" and choose the first result.

But lifetime mortgages are not identical products.

One plan might offer a lower rate but fewer features. Another could have a slightly higher rate but provide a repayment allowance, a useful drawdown facility or inheritance protection that is more appropriate for your circumstances.

You also need to consider fees and early repayment charges.

The right comparison is therefore not simply:

Which lender has the lowest rate?

It is:

Which suitable plan gives me the right combination of rate, cost, flexibility and protection for my circumstances?

What should you compare when looking at equity release plans?

1. Interest rate

The interest rate is important because it affects how quickly the balance can grow. However, it should always be considered alongside the other features of the plan.

2. The amount you need to borrow

Try to establish how much money you actually need. Borrowing more than you need may increase the eventual cost of the lifetime mortgage.

3. Compound interest

With a roll-up lifetime mortgage, you generally do not make monthly interest payments. Instead, interest can be added to the loan. Further interest can then be calculated on the growing balance.

4. Voluntary repayments

Some lifetime mortgages allow voluntary repayments without an early repayment charge, subject to the terms of the individual plan.

5. Drawdown

A drawdown lifetime mortgage can allow you to take an initial amount and keep a further amount available for future use, subject to the terms of the plan.

6. Early repayment charges

Some lifetime mortgages have early repayment charges, so these should be understood before you commit.

7. Inheritance protection

If leaving an inheritance is important to you, ask about plans that offer inheritance protection. This can affect the amount you are able to borrow.

8. Moving home

Some lifetime mortgages allow you to transfer the plan to another suitable property, subject to the lender's criteria. Your future plans can therefore be an important part of comparing products.

What does My Later Life charge for equity release advice?

At the time this article was written, our advice fee is £1,495.

We believe it is important to be clear about the cost of advice before you decide whether to proceed.

Our fee covers the advice and work involved in assessing your circumstances, researching suitable options, comparing available plans and guiding you through the application process if you decide to proceed.

Fee information is correct at the time this article was written and may change. Your adviser will confirm the applicable fee and any other relevant costs before you proceed.

There may also be other costs associated with an equity release application, depending on the product and your circumstances. These can include lender, valuation or legal costs, although some products may cover certain costs.

We will explain the costs that apply to your recommendation before you commit.

Is the initial conversation free?

You can speak to our team and discuss your circumstances without committing to an equity release plan.

How much could a 6% or 7% equity release rate cost?

The headline rate can be misleading if you don't consider how long the borrowing remains outstanding.

For example, imagine someone borrows £50,000 and makes no repayments.

At a purely illustrative annual rate of 6.5%, with interest compounding annually:

These figures are purely illustrative and are not a quotation. They do not include fees, further borrowing or the exact calculation method used by a particular lender.

They demonstrate why the interest rate is only one part of an equity release comparison. The longer the loan remains outstanding, the more important the effect of compound interest can become.

Can you reduce the cost of equity release?

Potentially, yes. There are several ways to reduce the long-term cost, depending on the plan and your circumstances.

• Borrowing only what you need
• Using a drawdown facility rather than taking everything at once
• Making voluntary repayments where permitted
• Choosing a plan with suitable repayment terms
• Comparing rates from multiple lenders
• Comparing fees as well as interest rates
• Considering alternatives to equity release

The right approach depends on your circumstances. Equity release should be considered alongside other ways of achieving your financial objectives.

Should I compare equity release lenders myself?

You can research the market yourself, and there is plenty of useful information available online.

The difficulty is that lenders have different criteria and products.

A rate that looks attractive may not be available for your age, property, borrowing requirement or preferred features.

You could contact each lender individually, compare their products and work through their different criteria.

Or you can use a whole-of-market broker to do much of that comparison work for you.

At My Later Life, our role is to research suitable options, explain the differences and help you understand what each plan could mean for you. You can then make your own informed decision.

What does a whole-of-market equity release broker do?

A whole-of-market broker can search across a broad range of suitable equity release lenders rather than being restricted to one provider.

At My Later Life, we can compare relevant plans and look at factors such as:

The aim is not simply to find the lowest advertised rate. It is to identify a suitable solution and make sure you understand how it works before making a decision.

Equity release rates: MER and AER explained

You may come across the terms MER and AER when comparing lifetime mortgage interest rates.

MER means Monthly Equivalent Rate.

AER means Annual Equivalent Rate.

They are not necessarily interchangeable figures, so make sure you are comparing like with like.

If you are unsure what a quoted rate actually means, ask the adviser to explain it using your own proposed borrowing amount.

Should you consider alternatives to equity release?

Equity release isn't automatically the right solution simply because you own a property.

Depending on your circumstances, other options may include using savings, downsizing, remortgaging, a retirement interest-only mortgage or receiving financial help from family.

The right option depends on your circumstances and what you are trying to achieve.

A good equity release discussion should therefore consider alternatives as well as lifetime mortgages.

Is equity release right for me?

That is a question that cannot be answered simply by looking at an interest rate.

Equity release can have a long-term effect on your finances and your estate.

It can reduce the value of your estate and may affect entitlement to some means-tested benefits.

If interest is added to the loan, the amount owed can increase over time.

You should consider your circumstances, the alternatives and the long-term implications before deciding whether equity release is suitable for you.

Compare equity release rates: common questions