Equity release alternatives
Wondering whether equity release is for you? This guide explores some of the most popular equity release alternatives.
Equity release is one of many ways to gain access to extra income in retirement.
Remortgaging will allow you to gain a cash lump sum from the equity in your home.
The key difference between this option and equity release is that you’ll have to make interest payments on your loan.
That means you’ll need to pass affordability checks with your lender. You’ll also have to pay the mortgage back in full at the end of the term, rather than waiting until you die or move into long-term care.
Still, this does mean the amount of interest you owe will be a lot less overall. Therefore, if you can afford a remortgage deal, it’s an option worth exploring.
You’ll need to remortgage with a lender that allows you to borrow into retirement age.
Downsizing your property
Moving into a smaller home allows you to access your home’s equity without having to pay interest or sell a stake in your property.
If you sell your home and move into a smaller, cheaper property, you’ll be able to use the value difference to fund your day-to-day living costs.
Yes, you’ll have to pay fees for conveyancing, valuations, estate agents etc, but financially, it’s still likely to be a better deal than equity release.
Draw money from your savings or investments
The most obvious example of this is a pension. Under the government’s pension freedom rules, you can begin to access your pension funds from age 55.
Still, if this isn’t providing enough income, perhaps you can move other savings into an instant-access savings account, or another product you can draw down from.
You may be able to find a better interest rate on a credit card or a personal loan than on an equity release deal.
The downside to this is that you may have to make monthly interest payments. With a personal loan, you’ll also have to pay the capital back within a few years at the very most.
It is possible to secure a personal loan against your property – and doing so could land you a lower interest rate.
Letting out a room in your house to a tenant
By letting out a room in your house to a tenant, you’ll receive a monthly income to put towards your living costs.
Yes, you surrender some privacy when doing this. And there are certain responsibilities as a landlord you’ll need to read up on and follow.
Nevertheless, it’s a great way to use your house to make money, without surrendering any equity or paying interest on a loan.
What’s more, you can earn up to £7,500 per year tax-free, under the government’s Rent-A-Room scheme.
These final few options are unlikely to be suitable for everyone. Still, they may work for you.
- Continuing to work. If you’re still physically able to work a part-time job, maybe you’d like to continue doing so? An increasing number of Britons are working past retirement age, not only because they need the money, but also because they enjoy the challenge and the company of their work colleagues.
- Make use of local authority grants. Most local authorities in the UK offer grants to cover the cost of home improvements. If you’re looking for cash to fund repairs or upgrades to your home, investigate whether these grants are available to you. Eligibility rules differ depending on where you live in the UK.
- Borrow from family. If you’re fortunate enough to have a family member to help you out financially, perhaps you’d like to take them up on this offer? It’s possible to set this up as a loan, rather than a gift. In this case, you’ll need to create a contract stipulating when the loan will be paid back.
How do I know what option is most suitable for me?
This is a big decision and there’s likely to be a lot of money on the line, so it’s important that you’re confident in whatever decision you make to fund your later years.
More guides on Finder
Sites like Dolls Kill: Unique fashion to suit your style
Calling all fashion misfits! If you love Dolls Kill, you’ll want to know all about these similar UK stores.
Gadget insurance abroad
Find out whether you need gadget insurance for travel and what’s included in the cover, plus tips to keep your devices safe while travelling.
Mortgages for students: Buy-for-uni
Discover how you can use buy-for-university mortgages to buy property as a student.
Get ready for Pancake Day 2021!
When is Pancake Day 2021 and why do we celebrate it in the UK? Plus, get all the gear you need to celebrate the big day, whether you’re making from scratch or flipping a pre-made batch.
Compare international money transfers
Learn how to compare international money transfer services so you can get the best exchange rates and lowest fees.
Compare the best business credit cards of 2021
Saving time on expense reports and streamlining your cash flow are just a couple of the many perks you could enjoy with a business credit card. Compare interest rates and check your eligibility today.
The Help To Buy mortgage scheme
Discover how the Help To Buy government scheme can make it more affordable to buy a new-build property in the UK.
Enhanced lifetime mortgages
If you’re in poor health, an enhanced lifetime mortgage can help you unlock more of the equity in your home.
Lump sum equity release
Unlock the equity in your home upfront with a lump sum lifetime mortgage.