Understandably, the lower the set up costs for any mortgage, the better. This is the same for equity release schemes, which can vary significantly from lender to lender. It is always best advice therefore to seek independent financial advice from an experienced broker to research for you. Being whole of market, once a full financial planning report has been completed, they should then make a recommendation from the range of equity release mortgages available.
A Key facts illustration will then be published which will outline under FSA (Financial Services Authority) guidelines what the proposal from the mortgage financial advisor will be. This will include the pros & cons of the scheme, the future balances of the compounding interest, early repayment charges & the set up costs as we are to discuss: –
Apart from any upfront advice fee (which should be avoided), the only fee that could be payable upfront is the valuation/survey fee. This can vary between providers from 1% of the property valuation upto a tiered rate system on the same basis. However, always shop around as you will find special offers on this fee ranging from FREE valuation upto a refund of the valuation fee on completion of the lifetime mortgage.
Once the fee has been paid & the mortgage valuation is completed, the valuation fee cannot be refunded under normal circumstances.
As with any mortgage transaction, most lenders will charge a setting up or application fee for transacting their application. Agree with it or not, it is & has been an ever present in this market & shows no sign of disappearing. Nevertheless, there are occasions when these fees can be waived; however these are not as common as the free valuations as discussed above. The application fees again can vary from £500 upto £695, depending also on the type of scheme selected. The method of their payment can either be by the deduction from or addition to the loan on completion. There are plans that will actually allow you to make payment from your own funds before completion. By not being added to the mortgage, this will have the resultant effect of it not be included in the roll-up of interest on the equity release scheme & saving money over the longer term.
The conveyancing process must involve an independent solicitor acting on your behalf as laid down in the SHIP (Safe Home Income Plan) rules. The solicitor holds the key the length of the equity release completion process & this is where an experienced equity release solicitor can be invaluable. Although the equity release stages are similar to a conventional mortgage, it does have its idiosyncrasies where a solicitor experienced in equity release schemes would be aware of.
All fees are deducted at completion stage & on average you should not be paying more than £500 for their work. Ideally most fees can be in the region of £350+VAT & disbursements.
Financial advisers must be authorised to a certain standard to be able to offer equity release advice. To achieve this they must pass annual qualifications to obtain their respective title. Having this specialist tag & the work therein, demands that most quality advisors will charge an advice fee for their services. Although this is justifiable, it should also be ‘reasonable’.
Therefore, most advice fees can be anywhere from £595, & should be no more than £995 in scale. These advice fees can be charged upfront or you will find the better companies will only charge on completion. Therefore, should an application fail, no fee will be demanded.