Equity Release Interest Rates – What Are They? Guide, FAQs & More

Are you curious about equity release interest rates for 2024? If so, you’re not alone. Each month, over 7,000 people visit our website to learn about equity release. Here’s what you’ll find in this article:

• An explanation of equity release.
• How to get a realistic quote.
• Benefits of releasing equity.
• The risks of equity release.
• Current and best rates for equity release in 2024.

Equity release can seem tricky, but we’re here to help. Many people worry about things like losing their homes or paying too much. We understand these worries and aim to answer all your questions.

Our team has offered guidance to many people in your situation. We know what you’re facing and are ready to help.

Let’s start learning about equity release interest rates together.

How much does equity release cost?

The cost of equity release can be significant. 

With a lifetime mortgage, a standard interest rate that rolls up for over a decade can more than double the amount you owe, especially if the interest is compound instead of simple. This would mean releasing equity equating to 50% of your home’s current value could result in all of your home’s sale proceeds going to the lender when it is eventually sold. Remember, you can never owe more than what your property sells for. 

The cost of a home reversion plan can be just as high – if not higher. Most lenders will ask you to give up a large amount of equity for less than half of its worth. If your property increases in value until it is eventually sold, these costs become even bigger. 

Along with these fundamental costs of equity release, there may be financial services fees to get advice before making a decision, solicitor and legal fees, and early repayment charges if you try to exit your equity release plan early. 

Can you pay interest on equity release?

If you have a lifetime mortgage and want to reduce the total debt that will be taken from your property value in the future, you can usually choose to make voluntary interest rate payments. 

Instead of letting the interest accumulate on the debt each month, you may decide to make monthly interest rate payments to keep the debt down. In doing so, the total debt owed when it comes to selling the property will be lower, leaving more inheritance for your estate’s beneficiaries. You may want to get financial advice before deciding whether or not to make equity release interest payments. 

What is the current interest rate for equity release?

A standard interest rate on a lifetime mortgage is between 4-8% at the time of writing. However, this is highly likely to have changed by the time you are reading. Once you’ve agreed on your interest rate it is normally fixed for the lifetime of your equity release scheme, but some may offer variable rates instead, which go up and down due to external factors. 

The rate you are offered will depend on the lender you use and the projections for your property. If the lenders project that your home’s value is more likely to decrease than other properties, you’ll be offered higher interest rates. It is not based on your credit score or financial circumstances because no regular repayments are due. 

What are the best equity release interest rates?

The best equity release interest rates are at the lower end of whatever is on offer at the time. If you can secure a rate close to 4% at the time of writing, this is likely to be one of the very best equity release interest rates on the market. This is, of course, subject to change over time. 

However, even securing a lifetime mortgage with one of the lowest interest rates can be costly if the mortgage is active for around a decade or more. As mentioned above, it could even double the total debt. 

Lifetime mortgage calculators

An equity release calculator will help you understand the cost of these mortgages and how the mortgage interest will be applied (compounding). It will project your total debt over ‚ÄòX’ number of years. You can find an equity release calculator on the websites of lenders that offer these types of mortgages. 

What affects the interest rate charged?

There are a number of complex factors that can influence equity release interest rates, not limited to the condition of your property, property market projections, your health and lifestyle (enhanced lifetime mortgages) and the economy. 

What is the catch with equity release?

There is no catch when releasing equity as long as you understand the scheme you are getting into. To ensure this is the case, always get independent financial advice from an equity release expert. 

Others may argue that the cost of equity release schemes and the mortgage interest charged is the catch.