19 Equity Release Alternatives in 2024?

Are You Looking for Alternatives to Equity Release? 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.
  • Last Updated: 30 Jan 2024
  • Fact Checked
  • Our team recently fact checked this article for accuracy. However, things do change, so please do your own research.

Contributors:

Francis Hui

Key Takeaways:

  • Some of the best alternatives to equity release include downsizing, renting out a portion of your property, taking out a conventional mortgage, or asking family members for financial assistance.
  • Accessing pension funds can be an alternative, but it's essential to understand the tax implications and potential impact on your retirement income.
  • Downsizing could potentially be a better option than equity release if you're comfortable moving to a smaller property and the equity in your current home is substantial.
  • A lifetime mortgage is a type of equity release scheme, where you borrow against a portion of your home's value while retaining ownership, providing a way to access capital without requiring monthly repayments.
  • Home reversion plans, which involve selling a portion of your property to a reversion company while continuing to live there rent-free, can be a viable option to other types of equity release.

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.

    The equity release alternatives you could consider in 2024:

    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.

    Learn More: Home Equity Release

    What Are the Best Alternatives to Equity Release in the UK?

    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 Common Alternatives to Equity Release?

    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. 

    Mortgage-Related Alternatives

    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:

    Remortgaging

    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

    Extending Your Mortgage Term

    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

    Retirement Interest-Only Mortgages

    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

    Home-Related Alternatives

    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:

    Downsizing

    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 

    Renting Out a Room

    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

    Sale and Rent Back

    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.

    Reducing Utility Bills

    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.

    Budget Review-Related Alternatives

    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:

    A Debt Management Plan

    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.

    Reviewing Your Spending Habits

    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.

    Using Savings and Investments

    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.

    Career and Business-Related Alternatives

    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:

    Continue Working

    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

    Change Employment or Find a Part-Time Job

    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

    Selling Assets

    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.

    Becoming an Entrepreneur

    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.

    Borrowing Money

    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.

    Retirement-Related Alternatives

    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?

    Pension 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

    Retirement Income Plans

    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.

    Grant and Benefit-Related Alternatives 

    Grant and benefit-related alternatives are also an option in the UK, so be sure to look into these before releasing your property wealth.

    Remember:

    Equity release can impact your eligibility for certain state benefits, which is why they can be considered an alternative to taking out equity release.

    Benefits you may be able to access include:

    • State benefits
    • Local authority grants

    These two categories in more detail:

    State Benefits

    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.

    Local Authority Grants

    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.

    Common Questions

    What Are the Best Alternatives to Equity Release?

    Can I Access Pension Funds Instead of Equity Release?

    Is Downsizing a Better Option Than Equity Release?

    How Does Lifetime Mortgage Compare to Equity Release?

    Can Home Reversion Plans Be an Alternative to Equity Release?

    Why Look for Alternatives to Equity Release?

    How Do You Choose the Best Equity Release Alternative for You?

    Will Downsizing Have Any Tax Implications?

    What Are the Alternatives to Equity Release for People With Poor Credit History?

    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)?

    Are Equity Release Alternatives Suitable for Everyone?

    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?

    In Conclusion

    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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