10 Alternatives to equity release 2024



alternatives to equity release

*Updated October 2023*

Before making any decisions around equity release, it’s worth considering alternative ways to raise the extra cash you’d like. Even if there is no perfect alternative, you may be able to partially fund your plans through other means and reduce the amount of equity you need to release, so less will need to be repaid when the time comes.

In this article, our equity release expert Ashley Shepherd sets 10 alternatives to equity release. 

What are the alternatives to equity release?

Depending on your personal situation there are a range of options it may be worth looking at as an alternative to equity release.

  1. Downsize your home - free up money tied up in your existing property by moving somewhere smaller/less expensive
  2. Remortgage to release equity - a lower rate would give you cheaper monthly repayments
  3. Take out a retirement interest only mortgage - making monthly repayments on the interest not the loan
  4. Rent out a room - if you have enough space on either a short or long term basis
  5. Borrow using credit cards or a personal loan - a credit card with a low interest could be an option for small amounts
  6. Borrow money from family or friends - this may be a cheaper alternative but we recommend putting repayment plans in place
  7. Stick to a budget - look at your outgoings and see if you could make cutbacks or savings
  8. Use your savings and/or investments - consider whether drawing on your savings could be a better alternative than equity release
  9. Apply for any grants or benefits you’re eligible for - its worth checking if you are eligible for any grants or benefits
  10. Get a job/ continue to work - seeking full or part time work could be an alternative to releasing equity

More information that may help you decide if equity release is right for you

> What does Martin Lewis have to say about equity release?

> What types of equity release are there?

> Who is eligible for equity release?

The alternatives to equity release in more detail

Each alternative to equity release has it's own pros and cons. Whether they are viable will depend on your personal and financial situation. To help you weigh up whether any of them could work for you, here’s some more information on each alternative, including how some compare with equity release.

1. Downsize your home to release equity

Downsizing your home could free up the money tied up in your existing property. As well as boosting your finances, a smaller property has the bonus of lower council tax, household and energy bills.

A smaller property that is easier to maintain can also help you plan for the future. For example, a property with fewer stairs may prove invaluable in later life when you are not quite as mobile as you used to be.

Downsize or equity release?

The benefit of downsizing is you get the money you need whilst retaining 100% ownership of your property value. However, downsizing can be expensive once you factor in moving costs, and could mean a change of location to find a cheaper property. If it makes sense to stay in your own home either from a financial or an emotional perspective, equity release may be  more suitable.

It really depends on what downsizing means to you. Your quality of life is an important consideration. Moving to a smaller property, closer to family with lower running costs could be a wise decision, however moving to a different area away from friends and neighbours you have known for years could leave you feeling isolated.

2. Remortgage your home to release equity

If you have an existing mortgage, you could consider remortgaging with your existing lender or a new one. Remortgaging to a lower interest rate would give you cheaper monthly repayments whereas increasing your mortgage will free up some of the equity you have built up over the years. 

Remortgaging will depend on your age, financial status and the size of the loan needed to the value of your property. It may mean higher monthly repayments or increasing the term of your mortgage, so it’s important to seek independent professional advice.

3. Take out a retirement interest only mortgage (RIO) to release equity

A retirement interest only mortgage is similar to a standard mortgage except, as the name suggests, you only make monthly repayments on the interest not the loan. The loan is usually only repaid once you have died or moved into care and the property is sold.

Also, unlike a standard mortgage, you only have to demonstrate you can repay the monthly interest repayments, so retirees generally find this type of mortgage easier to qualify for.

Is it better to remortgage or equity release?

Whether it is better to remortgage or release equity will depend on your personal situation.

The older you are, the harder it may be to remortgage to a standard mortgage. Not only due to your age (some lenders impose age limits), but also the length of the mortgage term and your income. You’ll need to demonstrate you have enough money each month from your earnings, pension or savings, to cover your mortgage repayments and other outgoings.

A retirement interest only mortgage overcomes any issues with the mortgage term and your age, however you’ll still need to prove you can afford to make the monthly interest payments.

With an equity release lifetime mortgage, affordability is less of an issue simply because there are no monthly repayments to make. 

However, the amount needing to be repaid will be much higher than these other types of mortgage. This is because the interest on a lifetime mortgage is compounded either monthly or annually and only repaid when you die or go into long term care. So the size of the loan grows at a much faster rate.

And if you still have a mortgage on your home, the money you release must be used to pay it off first.

Ultimately, remortgaging means you will have more money to leave to family than you would equity release however you do need to be comfortable with the monthly repayments.

4. Rent out a room to increase your income

If you have enough space and happy to share your property, you could consider renting out a room to raise cash. This could either be on a short-term basis, perhaps as a holiday let if you live in a tourist area, or on a longer term basis.

The Government’s rent-a-room scheme allows you to earn up to £7,500 a year tax free (or £3,750 if the income is shared with a partner) for the rental of furnished rooms.

5. Borrow using credit cards or a personal loan as an alternative to equity release

Credit cards or personal loans could be an alternative to equity release, but it all depends on how much money you want to raise and how quickly.

A credit card with a low interest rate could be an option for smaller amounts or a loan for larger sums however you would need to be credit worthy and comfortable with the monthly repayments.

6. Borrow from family or friends to avoid taking out high interest loans

If you can borrow money from friends or family, it may be an easier and cheaper alternative to equity release. It would need to be something you are all happy with and to save future embarrassment and possible arguments, it’s wise to agree the terms and put repayment plans in place in advance.

7. Stick to a budget to make sure you are making the most of you income

Budgeting may seem like a strange alternative to equity release however you may be surprised at how much money you could save. Start by listing and comparing your outgoings against your income, then see where you can make cutbacks and savings. 

8. Use your savings and/or investments if you have them and only after taking professional advice

If you already have any savings or investments tucked away, it is worth considering whether drawing on these could be a better alternative to releasing the equity in your home. However before taking a step like this,  it would be wise to seek professional financial advice first.

9. Apply for any grants or benefits you’re eligible for

When considering the alternatives to equity release, you should check whether you are eligible for any  government grants or means-tested benefits. This independent benefits calculator  recommended by the UK Government, is a great place to start and will help you understand if you’re entitled to make a claim.

10. Get a job / Continue to work to ensure you have a consistent income

If you are retired and in need of extra cash, then you may want to consider getting a job. For some, seeking full or part time work or continuing employment if you haven’t already retired could be a good alternative to releasing equity. For many though the thought of extending working life is just a step too far.

Moving forward

If you decide one of these alternatives to equity release will give you the extra cash you need, the value in your home will remain intact, ready for your family to inherit.  However, if releasing equity is still the best option, you can be reassured that you have explored all your options before moving forward.  

Next steps

To see how much equity you could release from your home, use our free and easy to use calculator.

Or for free advice from equity release specialist Age Partnership, call 0800 133 7380.

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