Equity Release Arrangement Fees

pat100

I see that some lenders offer lifetime mortgages as fee-free or fee-paid. E.g. “Standard Life Horizon 600 Lump Sum Fee-free” has no arrangement fee and an interest rate of 5.16% or the same mortgage as Fee-paid with an arrangement fee of £995 at 5.23%. 

Can anyone explain this? 

My wild guess is that, for the free version, they add the fee to the loan so you pay for it at the end of the mortgage term. But that means you will thus be effectively increasing the fee by paying compound interest on it, so they reduce the overall interest rate on the loan to compensate and to bring the increased size of this “deferred” fee down towards matching the alternative “upfront” £995 fee. (Figures found online)

TELLIT01

The Over 50s Money Saving forum has an ongoing thread about Equity Release.  You're likely to get much more feedback there.