What are the alternatives to equity release?

There are several alternatives to equity release that could offer you financial support without having to arrange an equity loan. Releasing money tied up in your home could be a good way to boost your income however as it reduces your family’s inheritance, it’s important to consider the alternatives first.

So, is there an alternative to equity release?

Here is a list of the main alternatives to taking out an equity release loan with information on how each one may or may not work for you:

  • Budgeting
  • Downsizing
  • Remortgaging
  • Retirement mortgages
  • Credit cards and loans
  • Renting out a room

Budgeting

Budgeting may seem like an odd alternative to equity release however if you aren’t clear on how much you spend vs your income, this may be a good place to start.

With a few adjustments, watching what you spend and being more focused on choices you make may provide that additional income you require. For example, choosing the best car or home insurance deals or switching energy supplier.

Downsizing

Many people downsize when they retire or when the children have left home and it can be a great alternative to equity release. However it’s important to consider all the implications such as the cost of moving, decorating and furnishing your new home and a possible change of location.

Downsizing may be the obvious alternative to releasing equity however if it means you must move to another area for it to be financially viable, or you hate the thought of leaving the family home, equity release may be your preferred option.

Remortgaging

If you are happy to make monthly repayments, then remortgaging your home could be a good alternative. Interest rates for equity release are higher compared to residential mortgages, which means it could save money in the long term and have no impact on the family’s inheritance.

Mortgage acceptability is however based on affordability and many providers have a maximum age threshold. Therefore this option depends on your age and credit history, something that isn’t relevant when applying for equity release.

Retirement mortgages

Retirement interest only mortgages let you pay the interest on your loan back every month, usually for the rest of your life. Then when you die or move into long term care and the property is sold, the original loan is repaid.

This can be a cheaper alternative to equity release however you will need to pass affordability checks to prove you can afford the monthly repayments. In addition, your home could be at risk if you don’t keep up with the payments.

Credit cards and loans

If the amount of money you require is small, you may want to consider a personal loan or using credit cards. Whether you qualify for the loan will depend on your credit rating and you will need to ensure you are comfortable with the monthly payments and amount of interest charged.

 Renting a room out

In you have enough space, you could rent out a room to generate extra income, or depending on where you live, advertise holiday lets on websites such as Airbnb.

The Government’s rent a room scheme lets individuals earn up to £7,500 (or £3,750 for joint owners) a year tax free renting out furnished accommodation to lodgers.

There are conditions to be aware of though such as the property must be furnished. You should also consider whether you are comfortable with the prospect of someone else living in your home.

Other alternatives to equity release

In addition to downsizing, budgeting, remortgaging or renting out a room, you may also want to consider the following alternatives:

  • Borrow from family – If funds are available and family are happy to lend you money, borrowing from a relative may be an option. It’s worthwhile agreeing the repayment terms before taking the loan though, so both parties know what they are letting themselves in for.
  • Get a part time job – Getting part time work may be an alternative if you want to keep active and earn some extra cash. Having said that suitable part time jobs may be hard to find and you might prefer not to continue working any longer than you already have.
  • Get what you’re entitled to – Benefits are available for those on low incomes as well as grants to help with home improvements, so check with your local authority if you think you may be eligible for help.

The good thing is that although the decision to release equity from your home is a big one, as part of the process your adviser will also help you consider the alternatives. So there is absolutely no commitment until you are completely happy to proceed.

We know it's a big decision!

That's why we have teamed up with Age Partnership one of the UK's leading equity release specialists.

Find out how much cash you could release by clicking on the button below.

How much equity can i release?

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