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        Updated: April 19, 2024

        Equity Release: Early Repayment Charges

        Looking to pay off an equity release product early? It can be done! Find out exactly what early repayment charges (if any) you might come across in our guide.

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        If you are in retirement, or approaching retirement, an equity release plan can help you unlock value you have built up in your home over the years, bolstering your pension fund. The amount you borrow is normally repaid when you either pass away or go into a care home.

        Here, however, we look at what happens when you want to repay your equity release loan prior to your death or move to full time care. We investigate what the ramifications of early repayment are and identify other points to consider if you are thinking about repaying your equity release loan early.

        Can you pay off equity release early?

        In short, yes, you can. Ordinarily, people choose to go down the equity release route as it only needs to be repaid when they die or go into full time care (whichever comes sooner). When this happens, the home in question is sold to repay the debt plus any interest accrued. No other repayments are required.

        However, you may find that you want to repay your equity release loan early for the following reasons:

        • You are selling your house and downsizing, which frees up cash to pay back the amount you initially released.
        • You have inherited cash so you can both pay off the equity release as well as have enough funds to live comfortably.

        Your pension pot, come retirement day, is far more than you anticipated so you can repay some or all of your loan.

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        What are the typical early repayment charges?

        Early repayment charges vary from lender to lender, but it’s vital that you understand what those charges are before you take out equity from your home – especially if you envisage repaying some or all of it at some point.

        They may also vary according to how long you have had the loan. Some lenders may not charge a fixed penalty after you have had the loan for a certain amount of time, whereas some may always charge a fixed penalty that could be up to 25% of the initial amount borrowed. The amount your provider charges will be set out in your agreement.

        The large divergence in early repayment charges make it a good idea to talk to a specialist equity release broker before taking out one of these loans. They’ll be able to take into account your situation and circumstances – like your pension pot and your home’s worth, amongst other factors, to ensure that you access the best possible product . You may even find that a broker can help you find equity release with no early repayment charges.

        Remember, these products are designed for you to have for your lifetime, so you may find these charges are too expensive to be worthwhile paying. If this is the case, it’s worth considering other alternatives to equity release before making a final decision.

        Repayment options

        While equity release products are sometimes referred to as ‘lifetime mortgages’, where no repayments are needed, it is still possible to make payments to your lender to reduce the amount borrowed. Repaying your lifetime mortgage can help minimise the chance of the loan’s interest accruing so much that it eats into the remaining equity in your home.

        Customers can set up direct debit, regular style repayments, much like they would do with a traditional mortgage. These payments are voluntary and can be stopped at any time. The amount you repay will be determined by what you can afford balanced against the maximum amount your provider allows you to repay with no early repayment charges.

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        How a broker can help

        Equity release products are complex and the market of providers is vast. As a result, using a broker can be highly advantageous. A broker has the knowledge to find the best possible equity release product for you. Doing so should minimise the interest charged on your loan, while making sure you can release the maximum amount you need to maintain your retirement lifestyle.

        The brokers we work with will know what all the options are with regards to repaying your equity release loan, either in full or partially. Having an expert explain repayment options to you and the specific ramifications of doing so ensures you do not overextend yourself.

        If you get in touch we can arrange for an advisor with experience in this area to contact you straight away.

        Downsizing protection

        Some providers offer downsizing protection in their equity release products. It means that if you move into a smaller home, you can repay your loan with no repayment charges.

        However, there will often be certain conditions that allow you to make use of this protection. For example, some providers will only allow you to repay your loan after a certain amount of time.

        Get matched with a specialist equity release mortgage broker today

        Using a specialist equity release broker is the best way to ensure you find a provider that offers a product suitable for you. They will also find you providers that offer you a product with favourable repayment terms, should you wish to repay your loan early.

        We offer a free, no obligation matching service so that the right broker for your needs can contact you. Call 0808 189 0463 or make an enquiry with us today.

        FAQs

        The amount you repay on equity release will depend on the specific terms and conditions set out in your loan agreement. Different providers offer different repayment options. Some will allow you to repay your equity release with no charge after a certain period, while others will penalise you if you choose to repay it at any time before you pass away or move into a home. The amount that you finally repay to a provider will depend on the interest accrued and the initial amount borrowed.

        Ask A Quick Question

        We can help! We know everyone's circumstances are different, that's why we work with mortgage brokers who are experts in Equity Release Mortgages Ask us a question and we'll get the best expert to help.

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        Pete Mugleston

        Pete Mugleston

        Mortgage Expert, MD

        About the author

        Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.

        Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for OMA of course!

        FCA Disclaimer

        *Based on our research, the content contained in this article is accurate as of the most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us as well as any of our own are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs.

        Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.