Equity release alternatives

Equity release is one of many ways to gain access to extra income in retirement.

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Remortgaging

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.

Borrowing

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.

Other options

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.

It’s highly recommend to seek assistance from a financial adviser. In fact, if you’re seeking equity release, it’s compulsory to do so. In this situation, your adviser should tell you if there’s a better alternative to equity release available to you.