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What are the Alternatives To Equity Release?

Though we spend lots of our time promoting equity release and explaining how it can help homeowners to boost their income in retirement, we are aware that there are many great alternatives to equity release.

We would never want to deceive our clients into believing equity release is always the best option, especially when some people are simply not eligible for an equity release plan, so we would like to present some excellent alternatives.

However, just as we freely admit that equity release comes with some risks, we would also like to point out that these alternatives have some disadvantages.

It’s all about considering your personal circumstances, your financial situation, and working out the best path for you and your family, which our advisers can help you do.

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Is Equity Release the Best Option For Me?

Firstly, in order for equity release to be the best option for you, you must obviously be eligible. To find out the specific criteria of an equity release lender or a plan that you are interested in, speak to one of our advisers.

The general criteria that applies to every lender and plan is to be aged 55 years or more, to be a homeowner, and to have a property worth £70,000 or more.

Unfortunately, this is not often negotiable, so you should definitely consider an alternative to equity release if one of these factors does not apply to you.

The criteria for a lifetime mortgage and a home reversion plan are slightly different, as you must be at least 65 years old for a home reversion, and sometimes older.

However, even if you are entitled to use an equity release product, it is not necessarily right for you.

We would generally ask you to consider another option if you already have a good source of income, as it may not be worth dipping into these funds if you already have a good amount of savings or a large pension income.

Another reason to consider an alternative is if you want to leave as big an inheritance as possible, as equity release will reduce the amount of money you can leave to your beneficiaries.

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Are There Many Alternatives to Equity Release?

Yes, there are many different alternatives to equity release for you to consider, and some of them will not be viable for you, but everyone is bound to be able to pursue at least one alternative.

1. Check Your Entitlement to State Benefits

If you are not currently claiming means-tested state benefits, we encourage you to check whether you could be entitled to any. This would allow you to increase your income without having to go back to work.

Even if you are claiming benefits, it would be worth checking your entitlement as you could be claiming more than you are at the moment.

There are many great benefits calculators that you can use to see how much you could be earning, and most of these are free of charge (1).

As well as finding out how much you could receive, you can also discover how changes in circumstance may affect your benefits, which includes returning to work or moving in with a partner.

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2. Find Out If You Could Benefit From Government Grants

Another idea is to look into the many different government grants and find out if you could be eligible for any. The government provides many grants to people in their later years, particularly relating to bills such as water and electricity.

If you only tend to struggle with money at certain times, such as during the winter, this could be a great way for you to ensure you have a consistently comfortable retirement.

Some examples of grants you could be entitled to are: TV licence concessions, winter fuel allowance, home energy and efficiency grants, warm home discount, and disability grants.

The best place to start is to look online for grants available to OAPs, and make sure the webpage is updated as these grants change regularly (2).

3. Consider Returning to Work Or Starting Your Own Business

If you are really strapped for cash, you could consider going back to work, even if you work reduced hours. This could also ensure you are socialising on a regular basis, which isn’t always easy for people in retirement.

If you are particularly creative, you may even want to start your own business in something that you enjoy, which would make the idea of working again more attractive as you would be controlling your hours.

The government provides tips for registering your business to ensure you follow the correct legal process (3). There are also tips online from people who have been in this position themselves and want to help others access the freedom that comes with working for yourself (4).

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4. Make the Most Of Your Pension

Some people are lucky enough to have large pensions that carry them through retirement with ease, and if this is you, we encourage you to rely on this as sufficient income before choosing to take out a loan.

There is also the offer of Pension Credit for people who are of retirement age (currently 66) and can prove that they are low income (5).

5. Use Credit Cards

It is possible for you to start using credit cards to fund certain things in retirement, such as home improvements or a new car. However, remember that you would need to pay back the money you owed, so you would have to be confident that your income would cover this.

It is a requirement to make monthly repayments with credit cards, and there is interest charged on them, so it is essential that you have the funds to repay the cash (6).

You should also remember that people who purchase credit cards must be able to prove they have a good credit history.

The good news about using a credit card is that there are not repayment charges as there sometimes are with equity release deals.

This means you don’t have to worry about paying back more money when you can afford to, which will ease some of the burden.

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6. Dip Into Your Savings

If you happen to have any savings from over the years, now’s the best time to use them as you no longer have to spend money on your children consistently, and there is no point leaving money in the bank when you are struggling.

7. Get an Extension On Your Mortgage

If you haven’t paid off your existing mortgage yet, it may be possible for you to do this with a mortgage extension. By doing this, you could borrow more money to keep you going for a while.

You would have to speak to your standard mortgage lender about extending your mortgage term and they will let you know if this is in line with their policy.

8. Rent Out a Room In Your House

By renting out a room in your house, you could receive a regular income without having to borrow money. This is a great option for people whose children have moved out, leaving them with additional rooms that they don’t use.

With the Rent a Room scheme, you could do this in a cost-effective way as the first £7,500 that you earn from the rental income will not be taxed (7). This applies to anyone renting out a room, including if you decide to run a bed and breakfast business.

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9. Move House

You could always choose to move to a cheaper property where you would be paying out less on bills, provided that you have paid off your mortgage on the house you are currently living in.

However, this option is not always a quick fix, as it can take a while to sell your house and there are often many delays, which homeowners find to be stressful.

10. Get a Retirement Interest-Only Mortgage

With a retirement interest-only mortgage, you are borrowing money, but because you are repaying it consistently, the overall amount you owe is significantly lowered. This can be a great way to get your hands on extra cash without worrying about getting into debt in a big way.

11. Budget Well

If there is anything at all you can cut back on in terms of spending, now is the time to consider it. Perhaps you could start to do your food shop at a more affordable supermarket, you could get a free bus pass from the government instead of using your car, or you could choose to holiday in more affordable places.

There are always ways to cut back on your expenses, though they may make your retirement slightly less comfortable, whereas equity release offers you the opportunity to enjoy your money without any guilt.

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12. Borrow Money

If you know someone who is willing to lend you money, you should consider accepting, as it is not a complicated process as some of the other alternative options are.

For example, your credit score will not be taken into account and there are obviously no affordability checks as there may be with unsecured loans.

However, we encourage you to be careful as this can lead to the breakdown of relationships if the money is not paid back in due course. It can be a stressful decision for both the borrower and the lender.

If you need money to pay the bills each month, this is perhaps not the best option as it would be better to find a way to get a monthly income, such as through means-tested benefits, your pension, or an equity release lifetime mortgage.

Speak to Us About the Alternatives to Equity Release

If you would like to discover more equity release alternatives or you would like to find out more about the ones we have mentioned, don’t hesitate to pose your questions to one of our friendly advisers in a free consultation with our equity release team.

On the other hand, if this post has solidified the fact that equity release is the best option for you, we would be more than happy to talk you through the steps of releasing equity in your area. See our home page to find out whether we work in your town or city.

For some basic information, the most popular option is to take out a lifetime mortgage with an equity release lender, and 99% of equity release consumers choose to do this. However, the other type of equity release is a home reversion, and this offers unique pros and cons. Speak to us to find out more.

To take matters in your own hands, use our free equity release calculator that tells you how much money you could release from your home.

It’s a great tool for anyone who is unsure how much their equity release loan would help them with their retirement income. We also offer personalised quotes for the same thing.