Alternatives to equity release
So what alternatives are there to equity release in the UK? Explore the following alternatives to work out if there is a different financial solution available to you to meet your needs.
Downsize to a cheaper property
Downsizing to a smaller or cheaper property can be an excellent way to free up some of your assets. As you get older, it might make more sense to sell your property and downsize, giving you a more manageable property to enjoy your retirement.
Pros
• Can help you release a significant amount of equity.
• Reduces your overall housing costs.
• Makes your property easier to manage.
Cons
• Can come with high transaction costs.
• The property market can make it tough to find a suitable home.
• You may have an emotional attachment to your current home, or envisioned leaving it to your loved ones.
Extend your mortgage term
With rising mortgage rates and increasing cost of living, remortgaging to extend your mortgage term could be a simple way to reduce your monthly payment costs.
Pros
• Lower monthly mortgage payments
• Maintain ownership of your home
• Ease pressure caused by financial difficulties
Cons
• Could increase your total interest paid over your term.
• Mortgage extensions sometimes come with age restrictions.
• It will take longer to pay off the balance of your mortgage.
Rent out a room
Do you have additional rooms you could rent out? If you’re comfortable with sharing your space, you could make some extra money while remaining in your home.
Pros
• Generate extra income.
• Make the most of your space.
• Meet some new and interesting people.
Cons
• Privacy concerns
• Difficulties associated with being a landlord.
• Tax obligations.
Take out a retirement interest-only mortgage
You may wish to take out an interest-only mortgage if you can no longer afford a repayment mortgage. This could be useful if you plan to sell your home at some stage and benefit from an increase in value.
Pros
• Maintain your homeownership.
• Reduce your monthly payments.
Cons
• Interest-only mortgages are limited.
• There may be age restrictions with an interest-only mortgage.
Remortgage to release equity
You may be able to change your mortgage deal for a more favourable term. This could reduce your monthly payments, or help you release a lump sum.
Pros
• Access a lump sum.
• Potentially lower interest rates.
• Reduce the amount of interest paid overall.
Cons
• There could be stricter lending criteria.
• More favourable deals can be hard to come by.
• Risk of losing your property if you miss repayments.
Local authority grants or loans
You may be eligible for some local authority grants or loans, providing you with funds to make home improvements, such as improving heating systems.
Pros
• Can help you take care of repairs, adaptations and other needs.
• Favourable or no repayment terms.
Cons
• Strict eligibility criteria.
• Limited funding availability.
Get a part-time job
If you want to bring in some additional income, you could consider getting a part-time job. This could be a permanent or casual arrangement depending on your availability and how much you’d like to earn.
Pros
• Can supplement your retirement income.
• Could help you stay active.
• Allows you to learn new skills or use your existing ones.
Cons
• Impacts your time you could be spending doing something else.
• Could impact benefits.
• Potential tax implications for your pension.
Take out a personal loan
If you need a small amount of money for a short-term period, you could consider taking out a personal loan to help you give you the funds you need.
Pros
• Flexible use of funds.
• Fixed repayment schedule.
• Receive funds quickly after acceptance.
Cons
• Could be faced with a high interest rate.
• Eligibility is dependent on credit score.
• Repayments could be difficult to manage.
Use a credit card
If you’re able to secure a 0% or low-interest credit card, you could use it for short-term expenses that can be paid off quickly.
Pros
• Provides immediate access to funds.
• Many credit cards come with rewards such as cashback or air miles.
Cons
• Potential for high interest rates.
• Possible debt accumulation.
• Unmanageable repayments.
Change your spending habits
If you can manage your budget and change some of your outgoings, you could free up more money each month, providing you with a debt-free solution to improving your finances.
Pros
• Reduce your expenses.
• Improve the way you manage your money.
Cons
• Could require some lifestyle changes.
• Can be difficult with increased cost of living.
Sell assets
If you have valuable assets that are not essential for your financial security such as a second home or a vehicle, you could sell them to free up some money to fund a big expense or add to your monthly income.
Pros
• Generate some money.
• Simplify your finances.
• Sell items you no longer need or use.
Cons
• Loss of assets.
• Potential tax implications.
• Assets may not be as valuable as expected.
Get Help From Family or friends
If you have family or friends who could help you out in the short-term, it could be worth asking them for some assistance as opposed to seeking a credit solution.
Pros
• No interest or repayment terms.
• Could provide assistance quickly.
• No impact on your credit score.
Cons
• Dependence on others.
• Could strain relationships.
• Repayments could be difficult.
State benefits
Depending on your circumstances, you may find that there are state benefits you’re entitled to that could help supplement your income.
Pros
• Financial support in terms of grants or benefits.
• Can help ease financial strain.
Cons
• Must meet eligibility criteria.
• Benefits can change over time.
