What are the alternatives to equity release?

Releasing equity may end up being the most suitable option for you however it’s important to compare providers and consider all the alternative first. There are several alternatives to equity release that could provide a better way of boosting your finances including:

  • Downsizing
  • Budgeting
  • Remortgaging
  • A retirement mortgage
  • Credit card or loan
  • Renting out a room
  • Borrowing from family
  • Getting a part time job
  • Entitlements such as benefits and grants 

Is there a better alternative to equity release?

Now we’ll look at each of these alternatives equity release in turn and explain how each option could work for you and what you need to consider:

1. 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.

2. 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.

3. 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.

4. 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.

5. 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.

6. 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

If none of the above appeal to you, one of the following may offer you a better alternative to equity release:

  • 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 is a big one, as part of the process your adviser will also help you consider the alternatives and the downside to equity release. So there is absolutely no commitment until you are completely happy to proceed.

Updated 29th January 2021
by Ashley Shepherd
Ashley Shepherd

Ashley is the founder and managing director at Over50choices. With over 30 years’ experience in financial services, he has held senior roles in building societies, banks and insurance companies.

For your peace of mind..

Overchoices is a member of the Equity Release Council and regulated by the FCA. We recommend Age Partnership the UK's leading equity release specialist

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We know it's a big decision!

This is a big decision and you're right to question whether equity release is a good idea. As part of the process your adviser will help you consider the alternatives as well as the pros and cons of equity release. And remember, you don't have to commit to anything until you are completely happy to proceed.

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