Equity release allows you to access a cash lump sum by taking out a loan that is secured against your home. For some it can be a useful way of accessing funds to help out family, pay off an existing mortgage, repay existing debts such as credit cards, or boost your retirement income.
It’s certainly not something to be taken lightly however, and it won’t be suitable for everyone. There are significant costs involved and releasing money from your main home comes with a number of risks. You can read more information about equity release and how it works here and about some of the risks involved in our guide Equity release – what are the risks?
Want to speak to a mortgage advisor? Speaking to an experienced mortgage advisor can help you to understand your options and get a great deal on your mortgage.
If you’re looking for expert mortgage advice, you can get a free consultation with an independent mortgage adviser at Fidelius. Speak with a qualified, FCA-regulated, independent mortgage adviser you can trust. Rated 4.7/5 on VouchedFor from over 1,250 reviews.
Potential alternatives to equity release
Taking out an equity release product is a big financial decision and if you need to raise extra funds, it isn’t your only option. Before committing to any particular course of action, it can be extremely helpful to consider if there are any other potential alternatives to equity release that might help you achieve what you need.
Consider downsizing or moving to a cheaper property
Depending on your health, financial commitments and overall circumstances it might be worth considering downsizing or moving to a cheaper area if you need to raise a large amount of cash.
It’s worth pointing out that this can still come with significant moving costs such as estate agents fees, removal costs and stamp duty charges. Learn more about these in our article How much does it cost to move house? The upside however is that you will know exactly where you stand and hopefully will be able to clear all your debts. Depending on how much cheaper the property you move to is, you may even end up with a cash surplus to help cover your living expenses.
The reality of downsizing is that financial considerations will only be one part of the decision. Many people choose to move to a cheaper property for health or lifestyle reasons – a smaller house to maintain, fewer stairs, a bigger garden in a cheaper more rural location and so on. It’s also important to think about the downsides of moving, not only are there costs involved but if you move away from friends and a strong sense of community – it can have a significant negative impact on your quality of life. Learn more about downsizing and whether it could be the right option for you in our article Five questions to ask yourself if you’re considering downsizing.
If you’re thinking of putting a property up for sale, you can see which agents will do the best job of selling your home, based on past performance, using the GetAgent.co.uk website.
Remortgaging or taking out a retirement interest-only mortgage
If you’re still paying off an existing mortgage, you may be able to extend the term or even borrow more depending on your circumstances. Age alone is rarely an issue for people when they come to remortgage these days – more often than not, it is the income affordability assessments that the mortgage provider has to do that restrict the availability of mortgages on offer and the amount you can borrow. These are typically stress-tested under scenarios where interest rates rise significantly. They must also factor in any fall in income you might experience after you retire to check the repayments will still be affordable. Find out more in our guide Mortgages for over 50s: What you need to know.
Another mortgage option that might be available is a retirement interest-only mortgage. These are similar to a standard interest-only mortgage where you only have to pay the interest on the loan each month, however there is one crucial difference. It is assumed that the loan itself will only be repaid when you die, or sell the house. This means that the affordability criteria is assessed on your ability to make the interest payments and you don’t need to prove your ability to repay the loan itself at the end of the term, as you would with a standard interest only mortgage. It also means that you may be able to access additional funds when you remortgage. You can read more about retirement interest-only mortgages here and about how they compare to equity release lifetime mortgages in our guide What’s the difference between a lifetime mortgage and a retirement interest-only mortgage?
Want to speak to a mortgage advisor? Speaking to an experienced mortgage advisor can help you to understand your options and get a great deal on your mortgage.
If you’re looking for expert mortgage advice, you can get a free consultation with an independent mortgage adviser at Fidelius. Speak with a qualified, FCA-regulated, independent mortgage adviser you can trust. Rated 4.7/5 on VouchedFor from over 1,250 reviews.
Drawing money from your pension
If you are aged over 55 and have a defined contribution pension, you might be weighing up whether to drawing money down from your pension as an alternative to equity release. However, accessing your pension is a significant financial decision that you will need to consider carefully. With increasing life expectancy and a rising state pension age, it’s vital to think about how you will fund your retirement and consider the long term impact on your retirement income of dipping into your pension savings.
If you have a defined benefit or final salary pension and are considering transferring it to a defined contribution pension to access some of the cash built up in it, this is very rarely the right decision. You can read more in our guide Should I transfer my final salary pension?
For more information about accessing your pension savings you might want to consider reading the following guides:
- Should I use my pension to boost my income
- How pension drawdown works
- Should I take my tax free pension cash at 55?
In addition to our free resources, there are other sources of help available. If you’re 50 or over and have a defined contribution pension, you can get free guidance on the options available to you from the Government’s Pension Wise service.
However, if you want personal recommendations or advice about your specific circumstances, you’ll need to seek professional financial advice.
If you’re considering seeking professional financial advice on the options available to you, we’ve partnered with nationwide independent advice firm Fidelius to offer Rest Less members a free initial consultation with a qualified financial advisor. There’s no obligation, however if the adviser feels you’d benefit from paid financial advice, they’ll talk you through how that works and the charges involved.
Fidelius are rated 4.7 out of 5 from over 1,500 reviews on VouchedFor, the review site for financial advisors.
Unsecured loan
If the amount you’re looking to access is relatively small and you can afford the monthly repayments, you could consider a personal loan or balance transfer credit card to help make ends meet in the short term. Before taking out a 0% balance transfer credit card, it’s important to make sure you are confident that you can pay down the balance before the rate reverts to its expensive standard rate. You can read more about the difference between balance transfer credit cards and personal loans.
Cutting costs and making a strict budget
We know it’s not always possible, but if there is any chance you can raise the money you need from cutting costs and living off a strict budget it is certainly worth considering. No doubt it will be more difficult in the short term, but your long term financial health will thank you for it. We have several articles that may be of interest on this topic.
Try to boost your income
Depending on your personal circumstances, you could consider taking on a full or part time role to make ends meet. It won’t be suitable for everyone and is a very different lifestyle choice but if you are interested in exploring options, on our careers hub we have tens of thousands of jobs with age diverse employers across the country.
It’s also worth ensuring that you are claiming all the Government benefits you are eligible for, especially if your income has fallen recently, you may be eligible for financial help from the government. To find out which benefits you may be entitled to, and how to claim, visit the government’s benefits calculator here.
Where can I get advice on equity release
If you don’t think any of these alternatives will help you achieve your goals and you want to find our more about accessing money from your home through equity release – you can find more information in the following articles:
As releasing equity from your home is a significant financial decision, it can be helpful to do as much research as possible before making any decisions. It’s currently a requirement that you speak to a qualified financial advisor before signing up for an equity release plan, to ensure that it is suitable for your circumstances and that you’ve made an informed decision based on all the available information.
It’s essential to use an advisor who has an equity release qualification and who can recommend a suitable product for you from a member of the Equity Release Council, which is the trade body for the equity release sector. This ensures that a number of minimum product standards will be met to help safeguard borrowers.
Want to speak to a mortgage advisor? Speaking to an experienced mortgage advisor can help you to understand your options and get a great deal on your mortgage.
If you’re looking for expert mortgage advice, you can get a free consultation with an independent mortgage adviser at Fidelius. Speak with a qualified, FCA-regulated, independent mortgage adviser you can trust. Rated 4.7/5 on VouchedFor from over 1,250 reviews.
See how much wealth you could unlock from your home with this free, easy to use calculator. Fill in a few details to get an estimate – and if you’d like some advice, arrange to speak to an expert.
Rest Less Money is on Instagram. Check out our account and give us a follow @rest_less_uk_money for all the latest Money News, updated daily.