Alternatives to equity release

This page was last updated on 1 September 2021

Alternatives To Equity Release In 2021

Forms of equity release such as lifetime mortgages and home reversion plans are becoming increasingly popular as a means to pay for care in the later years of one’s life as retirement pensions are not always enough. However, it is not the only way to achieve this. All equity release advice must include the exploration of other alternatives.

It is important to assess the pros and cons of equity release before agreeing to sign up for it. It is also important to note that not everyone is in the same financial or social position in their elderly years.

Therefore, the most important task is to find a method that is most suited to you to fund your retirement and guarantee your security and peace of mind in your old age.

Alongside exploring an equity release option, it is equally important to carefully consider other options that are available to you. There are several alternatives to equity release that could be considered before approaching equity release brokers. 

Topics that you will find covered on this page

You can listen to an audio recording of this page below.

 

1. Moving to a different home

‘Downsizing’ or moving to a cheaper home is the most obvious alternative to home reversion plans and other forms of equity release. If you are a homeowner who needs to raise money, you might want to consider moving to an area, town or village with cheaper property prices.

Alternatively, if you have lived in the same place for a long time and have strong ties to your community you could instead move to a smaller property in the same area.

This option would allow you to be the sole owner of your property, unlike in a home reversion plan. 

Some things to consider

Down-sizing is not a suitable alternative to equity release if you require a quick injection of cash. This is because buying and selling property is not a quick process.

Additionally, the market value of your property might significantly differ from your expectations, due to a depressed property market or the condition and location of your home. 

Similarly, it also involves some additional expenses such as stamp duty or moving and removal costs which might not be affordable for some.

2. Mortgage extensions

Another alternative to equity release is requesting your current lender to extend your mortgage term by 5 to 10 years. If your monthly outgoings are too high and therefore difficult to meet, this option may help.

While a mortgage extension might not impact monthly interest repayments, the reduction in monthly principal repayments could help ease financial pressures.

Some things to consider

Older homeowners might not be able to alter the terms of their mortgage as some lenders have a maximum age of 65.

However, it must be noted that some lenders are more flexible and willing to consider on a case by case basis, regardless of age and some have a maximum age of up to 95.

3. Renting out to tenants

If you have a spare bedroom or two in your house you might want to consider renting out to create additional income. This would give you a stable and regular injection of cash every month to supplement your regular income.

The government’s Rent a Room Scheme allows you to earn up to £7,500 per year tax-free if you are letting out furnished accommodation in your house. Under this scheme, you are allowed to let out as much of your house as you want.

Some things to consider

Certain criteria have to be met to be eligible for the government’s Rent a Room scheme. For example, any room lettings must be furnished. More details relating to this programme can be found on the government’s website and should be consulted before you decide to let out a part of your home.

Additionally, some homeowners might be uncomfortable with sharing their home with strangers, making this an unsuitable alternative to equity release for them.

equity release alternatives

4. Getting help from family and friends

Although money problems might seem like an uncomfortable subject to broach with your loved ones, they might want to assist in easing the financial pressure on you. If the funds are necessary for your health or comfort, they might be willing to give you a loan or to provide financial support without expecting repayment.

Relatives might also be reluctant to let you sign up for equity release as this would leave them with a reduced inheritance.

Some things to consider

Before asking for help from loved ones, it is a good idea to keep their financial situation in mind. They might not be in a position to provide significant financial help. This is, therefore, an unsuitable solution if you need a large amount of money. 

"‘Downsizing’ or moving to a cheaper home is the most obvious alternative to home reversion plans and other forms of equity release. If you are a homeowner who needs to raise money, you might want to consider moving to an area, town or village with cheaper property prices. "

5. Making use of existing savings and investments

If you have savings, investments or assets that you have stowed away as a cushion for difficult times, it might be a good idea to consider using them before deciding to go down the route of equity release.

It could be a good idea to tap into your savings to make life more comfortable post-retirement.

Some things to consider

The decision to draw from your savings should be taken with a lot of caution as you may require that money at a later time. If you do decide to do this, it is a good idea to plan ahead and set yourself monthly allowances to prevent running into financial difficulty later on.

equity release product

6. Contacting your local authority

Local authorities sometimes have schemes that can provide financial relief to residents with low incomes, through grants and loans. If you need money for home improvements, it might be a good idea to investigate the assistance your local council can offer.

Local authority grants can be used for repairs of your existing home or could help towards moving to a different property. Local councils are often also able to provide grants for home improvements for disabled residents, so that they can adapt their homes to allow them to live an independent life.

Making use of these grants might also help in increasing your home’s value if you decide to sell it later. 

Some things to consider

Because these grants and loans are designed to help lower-income groups, local authorities usually only provide means-tested benefits. This means that specific criteria may need to be met to access them.

It is important to check the terms of these and other similar state benefits online beforehand to prevent wasting your time and effort.

7. Taking out a retirement interest only mortgage (RIO mortgage)

Making changes to your existing mortgage could also be a good alternative to equity release. Under a retirement interest only mortgage, homeowners can re-mortgage their property to release some of the equity in their home or to help with their debt.

Under this type of mortgage, your monthly payments are significantly lower than a traditional mortgage because you are only required to pay off the interest.

Unlike regular interest-only mortgages, RIO mortgages do not have a fixed date by which the balance must be repaid, and the outstanding mortgage can be paid off when the homeowner sells the house, passes away or moves into care.

Some things to consider

Certain conditions have to be met before banks and building societies offer homeowners an RIO mortgage. They must be at least 55 years of age and must pass affordability checks confirming that they will be able to meet the monthly interest payments.

Additionally, if you switch to an RIO mortgage and are then unable to make the monthly payments, your home will be at the risk of repossession.

Homeowners must also note that as their house will be sold after their passing or move into long term care, they will not be able to pass down their home to their children or a surviving spouse. It is recommended that you seek legal advice before pursuing this option. 

8. Finding a part-time job

Aside from pension income, extra income from working past the retirement age could also help in funding your later years. Getting a part-time job is also an option if you are not willing or able to work full-time post-retirement. This would bring in extra money and could help in easing the financial burdens of post-retirement life.

Many employers are starting to value the experience and maturity of senior workers and are actively looking to hire and train them. There are also specialist recruiting firms that focus on placing mature candidates into employment.

Some things to consider

If you have health concerns it might be physically impossible to restart working, even if you are in need of additional money to add to your retirement income. Senior citizens might also find it intimidating to return to the workforce, especially after a long period of retirement.

They might feel that they no longer have the necessary skills required to return to the workforce e.g. they might not be proficient in typing or using computers or smartphones.

Additionally, although many employers are increasingly willing to hire older workers, age discrimination continues to exist and many senior workers report the existence of a ‘grey ceiling’ that makes it more difficult to develop their career post-retirement.

equity release product alternatives

9. Taking out a personal loan

Homeowners in need of extra cash could pursue the option of taking out a loan instead of releasing equity. Personal loans, also known as unsecured loans,  are a form of instalment loan that allow you to take out a fixed amount of money in a single lump sum.

These loans do not require collateral and are not secured against your home or any other assets. Personal loans allow you to borrow more than you would be able to with a credit card and also have lower interest rates compared to other forms of borrowing.

Taking out a personal loan is a good option for those who need cash quickly, as a cash lump sum can be made available in a short period of time. 

Some things to consider

Although personal loans can be a useful solution for those in need of extra cash, they are not always the best choice in all financial situations. For example, if you need a small amount of cash you might wish to look at other solutions as most banks refuse to lend less than £1,000 or for shorter than 12 months. Such restrictions might encourage you to borrow a larger sum of money than you can afford.

Similarly, because the interest rate decreases if the loan is bigger, this might also encourage you to borrow money that you might not be able to pay back.

10. Taking out a secured loan

If you are in need of more money, another option might be to borrow against your home or other assets. 

Lenders are often willing to provide good monthly interest rates and many are willing to offer loans to older borrowers. 

Some things to consider

The repayments might be greater than a standard mortgage. If you are unable to manage your monthly repayments, your assets might get repossessed. 

Similarly, in order to be considered for a loan you will have to prove that repayment will not be an issue for you. They might want to look at your income and credit score before trusting that you will be able to make regular payments and offering you a loan.

11. Getting a credit card

Getting a credit card can help you to make purchases that you can repay at a later date. If you want to make a big purchase such as home renovations or buying an expensive appliance, a credit card can allow you to spread out the payment over a longer period.

Some credit cards also offer a 0% interest period which would also allow you to save money.

Some things to consider

Choosing to get a credit card is not a straightforward decision as there are some risks involved. If you are unable to pay back the borrowed amount, you could find yourself in debt.

Although some cards do offer 0% interest, if you have a poor or limited credit score, credit card providers might insist on setting a high-interest rate that could increase financial problems. Similarly, credit cards also come with fees and penalties if payments are not made in a timely fashion or if you exceed your credit limit.

12. Improving your spending habits

One of the simplest ways to save money is to set yourself financial goals, and be more mindful of your spending. You can research on the internet to get financial advice on how to stretch your income further.

It could be a useful idea to look at your spending and to see what you can cut out or find cheaper alternatives for. Instead of spending money on an expensive gym membership, you could take up running or use the free facilities provided by your local authority.

You could also make healthy lifestyle decisions such as quitting smoking or reducing your alcohol consumption. Changes such as these might seem insignificant at first but can often free up a large sum of money that can be used elsewhere for more important purchases.

Some things to consider

Although making changes in one’s lifestyle can ease some financial pressure, it might not be enough to fund any expensive purchases. Additionally, many households are already budgeting and might be unable to make further cuts in their spending.

See how much money you could be entitled to using the equity release calculator below

 

Want to find the best equity release deal or speak to a specialist to have your questions answered?

You can contact Key Equity Release, our partners, in one of 3 ways.   

  • Option 1 – Call directly on – 0333 567 1607
  • Option 2 – Book an appointment directly in the calendar below, and one of the Key team will call you back at your chosen time to discuss your requirements
  • Option 3 – Leave your contact details below and we will get in touch with you.

 

Option 1 – Call directly

Mon – Thurs – 9am – 8 pm

Friday – 9am – 5:30pm

Saturday – 9am – 5pm

Option 2 – Book an appointment, in the calendar below, for an equity release specialist to call you back when its convenient

Option 3 – Leave us your details and we will get in touch

Leave your contact details below and one of the equity release team will give you a call to discuss your needs.

Please note that all calls are undertaken by Key Equity Release, the UK’s leading equity release specialists. Key Equity Release is a trading name of Key Retirement Solutions Limited which is authorised and regulated by the Financial Conduct Authority

Other articles that you may find useful

is equity release a good idea

Many people consider equity release in later life but are unsure of whether or not an equity release product will be a good fit for their situation. This article help you understand if it is right for you.

how does equity release work?

Equity release can be confusing at times.  This in depth articles explains how equity release works, who the main providers are and the different type of products available today. We also expllain the pros and cons of taking out a scheme.

pros and cons of equity release

There are several key pros and cons to taking out an equity release product. This article examines the range of advantages and disadvantages associated with equity release. A worthwhile read if you are considering your options.

Lifetime mortgages are a popular type of equity release where you take out a loan secured against the value of your home. This type of scheme allows you to unlock money that is currently tied up in the value of your property.

equity release calculator

Most kinds of equity release calculator online are free to use.  All you have to do is fill in some basic information about your individual circumstances, and you will be shown an instant quote.

Home Reversion Plans

A home reversion plan is a scheme where you sell all or part of your home to a home reversion company in return for tax-free cash.  The money you release with a home reversion scheme can either be a cash lump sum or a regular income

Article author

James Lloyd

I am the primary writer and author for Help and Advice, having originally helped start the site because I recognised that there was a need for easy to read, free and comprehensive information on the web. I have been able to use my background in finance to produce a number of articles for the site, as well as develop the financial fitness assessment tool. This is a tool that provides you with practical advice on improving your personal financial health.

Outside of work I am a keen rugby player and used to play up to a semi-professional level before the years of injury finally took their toll.  Now you are more likely to see me in the clubhouse enjoying the game.

Email – james@helpandadvice.co.uk

Linked in – Connect with me

Frequently Asked Questions

Mortgage extensions

Another alternative to equity release is requesting your current lender to extend your mortgage term by 5 to 10 years. If your monthly outgoings are too high and therefore difficult to meet, this option may help.

Renting out to tenants


If you have a spare bedroom or two in your house you might want to consider renting out to create additional income. This would give you a stable and regular injection of cash every month to supplement your regular income.

Getting help from family and friends

Although money problems might seem like an uncomfortable subject to broach with your loved ones, they might want to assist in easing the financial pressure on you. If the funds are necessary for your health or comfort, they might be willing to give you a loan or to provide financial support without expecting repayment.

Making use of existing savings and investments

If you have savings, investments or assets that you have stowed away as a cushion for difficult times, it might be a good idea to consider using them before deciding to go down the route of equity release. It could be a good idea to tap into your savings to make life more comfortable post-retirement.

Share this page

Share on facebook
Share on twitter
Share on email
Share on linkedin