There are many alternatives to Equity Release, which I always explore with clients. These include: Selling assets, remortgaging, asking for help from family and friends, grants, moving to a cheaper home, state benefits, renting a room, budgeting, changing employment, or simply doing nothing.
Let's explore those alternatives in a bit more detail.
1. Sell assets
Do you have any other assets that you could sell, or release value from, to raise the money you're looking for?
For most people, their home is usually their most significant asset. But it does not mean that it is the only one from which they can release money.
If you have some personal belongings which you no longer want or need, why not consider selling them?
This could range from small items which you could sell at a car boot sale, to larger items which you could sell to independent specialists.
I am not suggesting selling priceless family heirlooms, but you may be surprised at the sum of your other assets you'd be happy to live without.
Have you considered remortgaging (or amending/extending your current mortgage arrangement with your existing mortgage lender)?
Nearly half of people I help advise on equity release have an existing mortgage. But only a handful have contacted their current lender to see what options are available to them before meeting with me.
This is something I would always suggest doing; you may be surprised as to the flexibility they afford.
Another option is a Retirement Interest Only mortgage (commonly referred to as a RIO).
RIO mortgages have no fixed term; instead, they can run for the rest of your life. And you are only required to make monthly interest payments to keep the capital owed level.
At the end of the mortgage, your estate repays the capital owed, just like an equity release plan.
We can help advise you on RIO mortgages, and explore if they are a more cost-effective solution for you.
3. Family or friends
Have you explored all possibilities in terms of potential help from your family?
While many of us would not think of asking family or friends to help, it may be something which they would be happy to do. This can be especially so where they are beneficiaries to your estate.
If you can avoid having an equity release plan, you will likely have more inheritance to leave beneficiaries in the future too.
The money you receive doesn't have to be permanent either. But if you can arrange a short term loan that doesn't incur interest, you will be able to save money in the long run.
If you are making amendments to the property for health-related reasons, your local authority may be able to grant you some funds.
Have you investigated this?
Small adaptation to your property can often be free – Your council may help pay for each adaptation that costs less than £1,000. This may be for items such as:
- Grab rails
- A concrete ramp or steps
- Lights that come on when someone is at your front door
You may also be able to get help with costs for more expensive adaptations, like fitting a wet room or widening doors.
There are many charities setup which offers grants. Independence at Home is a charity that does exactly this! You can visit their website www.independenceathome.org.uk to find out more about the work they do.
A Home Improvement Agency (HIA) may also be able to help you find schemes to help with the cost of adaptations. To find a local HIA you can visit www.findmyhia.org.uk/about.
Some local councils may be able to help with the cost of any urgent home alterations, so do check with your council or HIA.
5. Move home
Have you considered moving to a cheaper property?
This is the classic 'downsize instead' which is usually the first point of call rather than taking an equity release.
Downsizing isn't for everyone, and there are many other costs to consider, including estate agents fees, moving costs, and Stamp Duty Land Tax.
Plus, if your new home is of lower value, you will stand to benefit less from any property growth (considering if all properties rise at the same rate).
Equity Release could still be a sensible option to consider when purchasing your new home too.
A small top-up provided by a lifetime mortgage could work out to be a very cost-effective way of borrowing.
I have written an article on using equity release to purchase a property which may prove valuable.
6. State benefits
Have you fully investigated all options as to your entitlement to state benefits?
This can be a great way to provide you with ongoing money to help top-up your income.
I often use www.entitledto.co.uk to explore what benefits may be available for clients.
If there is money on the table from the state, it will likely leave a larger estate for your beneficiaries.
I have also written an article to explore the effects of equity release on benefit entitlements in more detail. It may prove a useful resource, as some benefits are, and others aren't affected by equity release.
7. Rent out a room
Would you consider renting out a room in your house to help you to achieve your financial goals?
Renting out a room could be a great way to provide you with an additional income.
I have even known clients enjoying the extra company of having other people live in their home.
If you have tenants, you can still get equity release. This could be a way of lowering any potential borrowing, providing you with both a lump-sum and ongoing additional cash each month.
Have you considered tightening your budget to achieve your financial goals?
Increasing your income is one way to provide you with additional spare cash each month. But another way is to reduce your outgoings.
One thing that I am always guilty of is arranging subscriptions, and letting them automatically renew without searching the market to find lower-priced alternatives.
This could include your:
- Gas and electricity
- TV and broadband
- Mobile phone
- Home insurance
- Car insurance
An excellent place to start is looking at all the direct debits you have arranged on your bank account.
MoneySavingExpert is a great resource to help you with your finances.
It won't be able to provide you with a cash lump sum, but it could be a great way to provide you with extra spare money each month.
9. Change employment
Have you considered changing employment (or, if retired) going back to work?
This is another excellent way to increase your income to provide you with more disposable cash each month.
If you are already in employment, can you get a higher paid job elsewhere? It may even be that you could earn more with your current employer; you may also be able to receive a pay rise in your current role.
If you are retired, then why not consider taking a part-time job? It can be a great way to meet people and stay active within the local community too.
10. Do nothing
What would be the consequences of taking no financial action (equity release or other) now?
This is an essential consideration.
For some clients, this is not something which they want to do, whereas for others it's not something they can do.
It could be that it would impact your lifestyle, or put a hold on some non-essential home improvements. But it could be that you have an interest-only mortgage to pay, and you need to do something, or you will lose your home.
Still, taking no action could be the right course of action for you to choose. And even if it results in pushing back an equity release plan, your estate will likely benefit from it in the long run.
I promised ten great alternatives; number 11 can be a bonus!
Do you have any private pensions from which you can draw money?
I will start by stating that I am not a pension advisor, and it may be that you wish to take separate pensions advice.
However, It is another fantastic way of releasing extra money. This could be in the form of a lump sum or an additional monthly income.
We can work with your financial advisor offering your pension advice to provide a holistic view of your options available.
It's quite often that pensions advisors work with us to help you access your money in the most tax-efficient way.
Let's sum up
Equity release is not suitable for everyone, and considering all your alternatives is an essential part of the advice process.
If you have found some viable alternatives, you should explore them fully; it may be that you can source some, or all, of the funds from these other means.
You can also find out how much money an equity release plan could provide you. Complete our online calculator (no personal information is needed), and you will find out the maximum that you may be able to release.
If you have further questions, why not speak with one of our qualified advisors?
Call us on 0207 158 0881 or use our online form to book your FREE consultation.
While a qualified equity release advisor has written this guide, it is not intended to be used as financial nor legal advice and should not be relied upon.
To understand the full features and risks of an Equity Release plan, ask for a personalised illustration.