19 Effective Equity Release Alternatives in 2024

Alternatives to equity release include downsizing, using savings or investments, or taking out a conventional loan or mortgage. Each option has its implications on lifestyle, financial planning, and estate inheritance.
  • Last Updated: 17 May 2024
  • Fact Checked Fact Checked
  • Our team recently fact checked this article for accuracy. However, things do change, so please do your own research.

Contributors:

Francis Hui
What Are the Best Alternatives to Equity Release in the UK? Discover the Top Nineteen Equity Release Alternatives and Find Out if It Would Be Better to Remortgage or Release Cash. Learn Which Option Could Suit You Best.
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Key Takeaways
  • Skip equity release with alternative options like downsizing, renting out a portion of your property, a traditional mortgage, or financial assistance from family.
  • Thinking of tapping into your pension instead? This is doable, but understand the tax implications and potential impact on your retirement income.
  • Downsizing provides a simpler, potentially cash-positive move; lifetime mortgages let you borrow against your home’s value without monthly paybacks; and home reversion plans offer cash by selling part of your home while letting you stay put.

Exploring alternatives to equity release is a crucial step for homeowners seeking to unlock their property wealth without sacrificing their estate. 

With 2022 seeing record-breaking activity in the equity release sector, as 93,421 new and returning homeowners opted to tap into their property value, according to Equity Release Council data1, it is clear that this is an option worth considering.

But first, we have detailed alternatives here to help you make an informed decision.

In This Article, You Will Discover:

    The Every Investor team conducted thorough research, consulting various financial sources and analysing recent market trends, to bring you this comprehensive guide on alternatives to equity release.

    This article delves into innovative options, from downsizing to debt management, to secure a financially stable retirement without the complexities often associated with equity release schemes.

    When considering financial planning, individuals should carefully assess various equity release options to find the one that suits their needs best.

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    Alternative Options to Equity Release

    What Exactly Is Equity Release, and Why Might You Consider Alternatives?

    Equity release allows homeowners to access their property’s value, but alternatives may offer more flexibility or lower costs.

    What Is Home Equity Release?

    Equity release is a financial mechanism for those over 55 to unlock the value in their home without needing to sell it.

    This option provides access to funds which can be used for various purposes, from supplementing retirement income to home renovations.

    It involves taking out a loan secured against your home, repayable when you pass away or enter long-term care.

    This allows you to benefit from your property’s value in the present, with the impact on your estate’s value deferred until a later date.

    To gauge the impact of interest on potential releases, individuals may use an equity release interest calculator to understand the long-term financial implications.

    To find the best equity release deals in the UK, individuals should explore offers from reputable providers and consult with financial advisors.

    Learn More: Home Equity Release

    What Are the Top UK Alternatives to Equity Release?

    Downsizing is a top alternative to equity release in the UK, allowing homeowners to sell their existing property and move into a smaller, cheaper one.

    Releasing funds tied up in the property without the need for loans or mortgages.

    This option gives you immediate access to your money, but it’s essential to consider moving costs and whether you’re comfortable leaving your family home.

    Renting out a portion of your home can also be a viable option. This can be done through a long-term lease or short-term options like Airbnb.

    This not only provides a steady stream of income but also allows homeowners to remain in their property.

    Each scenario requires careful consideration of the potential risks, such as landlord responsibilities or dealing with problematic tenants.

    What Are the Most Popular Equity Release Alternatives?

    Some of the most common alternatives to equity release mortgages include downsizing, taking in a lodger, continuing to work during retirement, and making use of your savings.

    Review our comprehensive list of equity release alternatives to determine the right option for you. 

    How Do Downsizing and Other Property-Related Strategies Compare to Equity Release?

    Downsizing and other property strategies can provide financial benefits without the long-term costs associated with equity release.

    Equity Release vs Downsizing: Which is the Better Option for Your Financial Future?

    Deciding between equity release and downsizing hinges on your financial circumstances and future plans.

    Is equity release worth it?

    Equity release offers a way to access funds while staying in your home, but it reduces your estate’s value over time.

    Downsizing, on the other hand, might provide a more significant lump sum and reduce ongoing expenses, potentially offering a more financially stable future.

    What Home-Related Alternatives Are There to Equity Release?

    Home-related alternatives represent avenues beyond the mortgage for using your home to gain access to income or save money during retirement.

    Options to consider:

    • Downsizing
    • Renting out a room
    • Sale and rent-back schemes
    • Saving on utility bills

    Some inspiration if you are thinking about this route:

    Is Downsizing an Effective Alternative to Equity Release?

    Downsizing is a favoured option for homeowners seeking to leverage property value without taking out equity release. 

    This option entails selling your current home to relocate to a more cost-effective, typically smaller, property, possibly reducing or eradicating mortgage requirements. 

    Another benefit:

    A smaller, newer, and / or more energy-efficient property could help you save on utility and maintenance bills.

    Consider:

    When considering whether to downsize or equity release, remember, while downsizing could help you free up some money, do not forget to include moving costs, real-estate agents’ fees, solicitor’s fees, and stamp duty in your calculations.5 

    Can Renting Out a Room Be an Alternative to Equity Release?

    Renting out a room allows full ownership and control over your property, offering flexibility to select tenants, establish rules, and end tenancies as needed, whilst providing companionship in retirement.

    Did you know?

    With the UK government’s Rent a Room scheme, homeowners can earn up to £7,500 annually tax-free from renting a furnished room in their main residence, applicable whether the property is owned outright or mortgaged.6 

    Remember:

    Taking in a lodger has it’s benefits, but you should consider implications like possible conflict and a lack of privacy before deciding on this option.7

    How Does Sale and Rent Back Compare to Equity Release?

    A sale and rent back scheme involves selling your home to a private firm and then renting it back, letting you stay in your home.8 

    Also referred to as ‘buy back’ or ‘sale and lease back’ schemes, these plans carry inherent risks, making it crucial to seek professional financial advice before entering into such agreements.

    Can Reducing Utility Bills Be an Alternative to Equity Release?

    Reducing utility bills could help you save money each month. 

    While some energy-efficiency options come with set-up costs, they could save you money in the long run.

    To reduce your utility bills, consider making energy-efficient upgrades like installing smart thermostats, sealing air leaks, or even installing renewable energy systems like solar panels. 

    These changes not only reduce your consumption but can also make you eligible for government incentives.

    Another option to consider is reducing your water consumption by taking simple steps such as fixing leaks, installing water-efficient appliances, and using water-saving fixtures, which can make a significant difference.

    What Are the Alternatives to Help to Buy for Equity Release?

    When considering equity release, you have several alternatives to the Help to Buy scheme.

    Shared ownership and sale-and-leaseback schemes stand out as two practical options.

    In shared ownership, you can sell a portion of your property to reduce your overall mortgage, while in a sale-and-leaseback arrangement, you sell your home and lease it back, freeing up capital tied in your property.

    What Financial Instruments Offer Alternatives to Equity Release?

    Various financial options, including mortgages and state benefits, can serve as viable alternatives to equity release.

    What Mortgage Alternatives Exist for Equity Release?

    Mortgage-related alternatives to equity release could be an option for you, depending on your age and additional qualification criteria.

    Alternatives include:

    • Remortgaging
    • Extending your current mortgage term
    • A retirement interest-only mortgage

    It is important to evaluate your financial situation and eligibility carefully and seek expert advice before making any decisions.

    More details on your mortgage-related options:

    Is Remortgaging a Viable Alternative to Equity Release?

    How does remortgaging work? Remortgaging involves replacing your current mortgage with a new one, which could offer better interest rates, additional funds, or different terms that better suit your later-life needs.

    Consider:

    Whilst re-mortgaging can potentially offer access to better interest rates or additional funds, approval for a new mortgage may require proof of a level of income you may no longer have after retirement.2

    Can Extending Your Mortgage Term Replace Equity Release?

    Extending your mortgage term is an alternative worth considering if you are looking to access additional funds without taking out equity release. 

    Be aware:

    This option could potentially offer lower costs in the short term, but your mortgage will end up costing more in the long run, as you will be paying interest for longer.3

    Are Retirement Interest-Only Mortgages a Good Equity Release Alternative?

    Retirement interest-only mortgages are tailored for older homeowners, requiring monthly interest payments but deferring capital repayment until the property is sold, usually due to the borrower’s death or move into long-term care. 

    Consider:

    Although potentially offering lower interest rates than equity release plans and avoiding compound interest, RIO mortgages do require monthly repayments and joint affordability checks.4

    Can State Benefits Be an Alternative to Equity Release?

    State benefits can provide financial support, and it is advisable to consult a financial advisor or your local authority for more information. 

    Inquire about the following options:

    • State pension: Eligibility is based on National Insurance contributions made during your working life.13  
    • Pension credits: This means-tested benefit offers additional support to individuals or couples with low incomes.14
    • Housing benefit: If eligible, this benefit assists with rent or housing costs.15
    • Attendance allowance or personal independence payment: These benefits provide financial support for individuals with health issues or disabilities.16

    To get an initial idea of qualifying benefits, use a benefits calculator.

    Are Local Authority Grants a Viable Alternative to Equity Release?

    Local authority grants are means-tested and serve specific purposes. 

    Eligibility criteria and grant schemes vary among local councils. 

    These benefits include:

    • Council Tax Reduction: Alleviates financial burdens related to property ownership.17
    • Disabled Facilities Grants (DFGs): Assists with essential adaptations like wheelchair ramps or bathroom modifications, based on individual needs and financial situation.18
    • Home Improvement Grants: Offers financial help for necessary repairs or improvements to ensure a safe and habitable home, depending on local council provisions.19 
    • Help to Heat Grants: Provides energy grants for homeowners to enhance energy efficiency through various home improvements.20

    To determine if you qualify for these grants, contact your local authorities or financial advisor.

    Can Adjusting Your Budget or Career Path Serve as an Equity Release Alternative?

    Adjusting one’s budget or career path can offer alternative solutions to financial needs without resorting to equity release.

    What Budget Review-Related Alternatives Are Available for Equity Release?

    There are budget review-related alternatives to consider if you are not sure whether equity release would be the right fit for you.

    Look at your budget carefully and see how you can reduce costs.

    Consider:

    • Debt management
    • A review of your spending habits
    • Using your savings and investments

    Each of these options briefly:

    Is a Debt Management Plan a Feasible Equity Release Alternative?

    A Debt Management Plan (DMP) facilitates strategic management and repayment of debts, helping regain control over personal finances.9 

    This strategy is beneficial for managing multiple debts such as credit card dues, unpaid overdrafts, store debt, or personal loans, by consolidating them into a single manageable plan. 

    Consider:

    A DMP is not a rapid solution and should be considered with the assistance of an accredited financial advisor or a debt advice organisation.

    How Does Reviewing Spending Habits Help as an Equity Release Alternative?

    Reviewing your spending habits is an essential step before contemplating equity release. 

    Through budgeting and financial planning, one can pinpoint areas for expenditure reduction and savings enhancement. 

    This process entails assessing monthly income, prioritising essential costs, and identifying discretionary spending that can be curtailed.

    How Does Reviewing Spending Habits Help as an Equity Release Alternative?

    Using savings and investments can be a prudent way to fund retirement prior to considering equity release. 

    If you have substantial savings or investments in assets like stocks, bonds, or mutual funds, evaluating these resources as potential financial solutions is recommended. 

    With financial advisors’ guidance, diversifying your investment portfolio through tax-efficient savings accounts or digital investment platforms could be beneficial.

    What Career and Business Alternatives Exist to Equity Release?

    Career and business-related alternatives to equity release could also help you enjoy a more comfortable, fulfilling retirement. 

    You may want to continue working and earning in retirement, especially if you are in good health.

    There are a number of ways to do this:

    • Continue working
    • Change your employment
    • Sell some assets
    • Become an entrepreneur

    A closer look at each of these alternatives below:

    Can Continuing to Work Be an Alternative to Equity Release?

    If you are healthy and enjoy your career, you may want to work into your retirement.

    Working during retirement is said to be excellent mental stimulation, as it can help you better structure your day, and maintain friendships and social connections.10

    Is Changing Employment a Viable Equity Release Alternative?

    Change employment or find a part-time job is an engaging alternative if your current position does not fit with retirement plans. 

    Even in later life, flexible or fulfilling employment options exist to maintain an active retirement. 

    Good news:

    The UK government offers support to help older citizens build their skills and develop employment opportunities.11

    How Does Selling Assets Compare to Equity Release?

    Selling assets involves assessing and determining the potential value of what you own. 

    Consider the following assets to part with:

    • Valuable collectibles: Art, antiques, or rare collectibles can fetch a significant sum when sold through appropriate channels.
    • Investments: Review your investment portfolio to identify liquid assets. Stocks, bonds, mutual funds, or even cryptocurrencies can be sold to release funds.
    • Secondary properties: Selling additional properties like holiday homes or rental properties can provide a lump sum for retirement financing.
    • Vehicles: Free up cash by selling high-value vehicles, such as luxury cars or classic automobiles.

    Do not forget to consider the effect selling valuables could have on your estate and your heirs’ inheritance.

    Is Becoming an Entrepreneur an Alternative to Equity Release?

    Becoming an entrepreneur offers an alternative to equity release, as it would allow you to use your skills and creativity to generate income and build wealth. 

    Consider these entrepreneurial avenues for retirees:

    • Online businesses: Tap into your expertise through e-commerce stores, digital consulting services, and reach a global or local audience.
    • Franchise ownership: Invest in a franchise to benefit from established business models and brand recognition.
    • Consulting and freelancing: Leverage your expertise to build a flexible and rewarding business.

    Speak to a financial advisor or pensions planner to obtain an opinion on whether this could be an option for you.

    Can Borrowing Money Serve as an Alternative to Equity Release?

    Borrowing money from family members may provide an alternative to equity release. 

    Be careful:

    Establish clear agreements and repayment plans to maintain healthy relationships and ensure everyone’s interests are protected.

    How Should Equity Release and Its Alternatives Factor Into Retirement Planning?

    Integrating equity release alternatives into retirement planning can align financial goals with more secure future prospects.

    What Retirement-Related Alternatives Are There to Equity Release?

    Retirement-related alternatives to equity release may be available to you if you are in a position to access additional support without having to tap into your equity.

    When it comes to your retirement-related options, you could consider:

    • Pension release
    • Retirement income plans

    Are these options good alternatives for you?

    Is Pension Release a Suitable Alternative to Equity Release?

    Pension release allows you to withdraw funds from your personal pension plan in the UK. 

    Contact your pension provider to determine the age at which you can access your funds, typically around 55. 

    With professional advice, you may be able to access up to 25% of your pension as a tax-free lump sum.12

    Are Retirement Income Plans Effective Equity Release Alternatives?

    Retirement income plans are another potential way to fund your later-life goals. 

    A pension annuity or drawdown pension could provide access to funds to make your retirement more comfortable.

    Exploring how does equity release work when someone dies is crucial for individuals concerned about the implications on their estate.

    Which Equity Release Alternatives Align Best With Your Financial Goals?

    Finding the right equity release alternative depends on your specific financial goals.

    If immediate cash flow is a priority, a lifetime mortgage might be suitable, allowing you to access your property’s value while retaining ownership.

    However, if leaving an inheritance is your goal, downsizing or a home reversion plan, where you sell a part or all of your property, could better align with your objectives.

    What Impact Do Equity Release and Its Alternatives Have on Your Financial Future and Estate Planning?

    Equity release and its alternatives affect long-term financial health and estate planning, with significant implications for inheritance.

    How Does Equity Release Impact Your Long-Term Financial Health?

    Opting for equity release can have significant implications for your long-term financial health.

    It might provide immediate financial relief, but it’s essential to consider the accruing interest and how it could reduce your property’s value over time.

    This decision could also affect your eligibility for means-tested benefits, so it’s crucial to weigh the long-term consequences against the immediate financial benefits.

    How Do Different Equity Release Alternatives Affect Estate Planning and Inheritance?

    Choosing an equity release alternative impacts your estate planning and the inheritance you leave.

    Options like a lifetime mortgage might reduce the value of your estate due to the interest that accumulates over time.

    Conversely

    Downsizing can preserve more of your estate’s value, potentially leaving a larger inheritance for your beneficiaries.

    Frequently Asked Questions About Equity Release Alternatives

    What Are the Leading Alternatives to Equity Release?

    Is Accessing Pension Funds a Better Option Than Equity Release?

    Downsizing vs Equity Release: Which Is the Better Option?

    Lifetime Mortgage or Equity Release: Which Is More Beneficial?

    Are Home Reversion Plans a Suitable Alternative to Equity Release?

    What Are the Reasons to Consider Alternatives to Equity Release?

    How to Select the Most Suitable Equity Release Alternative?

    What Are the Tax Implications of Downsizing as an Equity Release Alternative?

    What Equity Release Alternatives Exist for Those With Poor Credit?

    What Are the Fees Associated With Equity Release Alternatives?

    Will I Still Own My Home With Equity Release Alternatives?

    Are Equity Release Alternatives Regulated by the Financial Conduct Authority (FCA)?

    Who Are Equity Release Alternatives Best Suited For?

    Can I Use Equity Release Alternatives to Manage My Debt?

    Can I Use Equity Release Alternatives to Increase the Inheritance I Leave My Loved Ones?

    What Is the Role of a Financial Advisor in Finding Equity Release Alternatives?

    Final Thoughts on Equity Release Alternatives

    While equity release remains a popular choice for unlocking property wealth in retirement, it is crucial to consider alternatives that provide greater flexibility and avoid the same pitfalls. 

    Financial circumstances vary for everyone, and you may discover that a mere adjustment in spending habits and securing a personal loan can provide the financial freedom or breathing room you crave.

    While equity release has it’s merits, it is imperative to consult an advisor and thoroughly explore all the potential alternatives to equity release before making any commitments.

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