What are the alternatives to equity release?
Equity release helps thousands of homeowners every month to enjoy financial freedom. But it’s certainly not for everyone. It’s essential that you explore the alternatives with a specialist equity release adviser, as you may not need the amount of money that you first thought, or may not need to borrow any money at all.
Equity release alternatives
Moving to a cheaper property should be your first consideration. This could be a smaller property in the same community, or, if you’d prefer to stay in a similar-sized home, think about moving to a cheaper area. You will need to consider stamp duty, as well as fees for legal work, surveys and removal firms. Plus, the time it may take to sell your property.
Support from loved ones
Have you spoken to your family and friends about your financial needs? Whilst many of us find discussing money awkward, we would always encourage you to involve them in your decision. They may be happy and able to offer the support you need and any money you receive doesn’t have to be permanent. If you can arrange a short-term loan (with no or very low interest) you will save money in the long run.
Do you have any private pensions from which you can draw money? Our advisers are not pension experts but It’s quite often that pensions advisers work with us to help you access your money in the most tax-efficient way. This could be as a lump sum or an additional monthly income.
Reducing your monthly spending may be more achievable than you think. Start by writing down your monthly incomings and outgoings so that you are aware of your overall spending and aren’t paying for any subscriptions you are no longer using. Comparison sites can help you save on your monthly direct debits for things like utility bills, TV and broadband, insurance etc.
Local authority grants or loans (for home improvement)
If you need money for home improvements, have a look at what’s on offer from your local council first, as some offer grants (that you don’t need to pay back) or loans for this purpose. The money can cover the cost of adapting, improving or repairing your home, or even buying a new home. They each have their own rules so contact your local authority directly to see if you qualify.
Renting out a room
You could rent out your spare bedroom (if you have one), or even your driveway. Under the government’s Rent a Room scheme, you can earn up to £7,500 a year tax free – but you do have to make sure the room is furnished. Renting out a room could be a great way to provide you with an additional income and you may enjoy the extra company of having someone living with you.
Have you fully investigated all options as to your entitlement to state benefits? Use www.entitledto.co.uk to explore what benefits may be available to you – it’s free, simple to use and will give you an immediate answer. State benefits can be a great way to provide you with regular, guaranteed money to help top up your income.
It’s likely that your home is your most valuable asset but it does not mean that it is the only one from which you can release money. Do you have any other assets that you could sell to raise money? Maybe a second car or personal belongings. Depending on the money that you were hoping to raise through equity release you may be surprised at the sum of your other assets you’d be happy to live without.
Reviewing your employment
Working to bring in extra cash may seem intimidating if you’re approaching retirement or have been retired for a while. But it can be a great way to meet people and stay active within the local community too. If you are already in employment, can you get a higher paid job elsewhere? Or ask for a pay rise from your current employer?
What would be the consequences of doing nothing (equity release or otherwise) now? It could be a consideration if you could put some non-essential home improvements on hold or reduce your monthly income with lifestyle changes. But obviously if you have a mortgage to pay and you need to do something, or you will lose your home.
Other forms of later life lending
Equity release isn’t your only option if you are looking to borrow into later life. You may also want to consider:
Retirement interest only mortgage (RIO)
RIOs only require you to maintain the interest payments on your loan, meaning the balance of the mortgage remains the same until your property is sold. It is like an interest only lifetime mortgage except your home may be at risk if you take out a RIO and fail to make the monthly repayments.
Remortgaging with your current lender
You might be able to amend/extend your current mortgage arrangement with your existing mortgage lender if you still have an outstanding mortgage. It’s always worth contacting them as you might be surprised at the flexibility they can offer you.
Unsecured lending e.g. loan or credit card
If you are able to pay the money back in the next few years, then a personal loan or credit card may be the best solution. With interest rates at a record low, you could pick up a good deal. Or you may even be able to take out a credit card with a zero percent balance transfer offer.
It’s important you know
Whatever your motivation your adviser can help you to consider all of the alternatives and tell you if equity release a good option for you now and in the future. And it won’t cost you a penny for this advice as our fee of £995 is only payable on completion.
If you are considering equity release we recommend that you read through ‘Things to think about‘. Equity release will reduce the value of your estate and may affect your entitlement to means-tested benefits. You should think carefully before securing a debt against your home.Things to think about