Alternatives to equity release

Ashley Shepherd

Updated 24th August 2023

If you’re looking for ways to free up some cash or help fund your retirement, equity release may offer a tempting solution. However, there are many alternatives to equity release such as downsizing, remortgaging or budgeting that may offer you a better and cheaper solution for raising the cash you need.

In this article we explore some of the alternatives to equity release that you may want to consider.

Is there a better alternative to equity release?

The best alternative to equity release will depend on your current circumstances and requirements. Downsizing is an obvious alternative but getting a loan or remortgaging, perhaps to a retirement interest only mortgage may be a better option.

Remember, if you need to raise additional income in later life, equity release is just one of many ways you can do it. So its important to explore all the alternatives first to be confident in the financial decisions you make for the future

Downsizing

The most popular alternative to equity release is downsizing . Many people naturally choose to downsize when they retire or when the children have left home. It is important to consider all the implications though, 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 offer a better solution.

Budgeting

Budgeting may seem like an odd equity release alternative however if you’re unclear about what you spend vs your income, it could 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.

Savings and investments

Using any savings you have, cashing in investments or selling assets may offer a better solution to equity release but again this depends on your personal situation. If this is an option, it may be worth seeing advice from an IFA to check that it is the right course of action to take.

Remortgaging

If you are happy to make monthly repayments, then remortgaging your home could offer a good alternative. Interest rates for equity release are higher compared to residential mortgages, so you could save money in the long term and you won’t impact your family’s inheritance.

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

Retirement interest only mortgages

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

Rent a room

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.

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.

Work

Getting part time work may offer an alternative solution to equity release 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.

Benefits and grants

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.

So, what is the best alternative to equity release solution for me?

The good news is you don’t need to make a decision on your own. Many specialist advisers provide initial free advice, part of which is to review all your options and assess whether equity release is right for you, or if there is a better alternative.