Ten options other than equity release

Not everyone should use equity release. There are a lot of potential problems, so thoroughly weighing the choices is a smart idea first.

 

Not everyone should use equity release. There are a lot of potential problems, so thoroughly weighing the choices is a smart idea first.

What are some equity release alternatives?

1. Relocate to a less expensive home

Older homeowners who need to raise money should first consider downsizing. This can involve relocating to a smaller house in the same neighbourhood or to a home of a comparable size in a less expensive area.

Things to consider:

• Selling a house can take time, so it might not bring in money right away.
• If you purchase another home, stamp duty will be due.
• In addition, there are costs for surveys, legal work, and moving companies.
• The emotional cost of leaving the family home, especially if it is in a neighbourhood where you have lived for a long time

2. Extend your loan's term

Your lender might agree to extend the length of your mortgage by another five or ten years if you haven't paid it off by the time you retire. Your monthly mortgage payment would reduce as a result, reducing the strain on your income.

3. Renting a space

You might consider renting out a spare bedroom in your house or even your driveway if you have the room and the desire to do so. You are permitted to do so if your annual income is up to £7,500 under the Rent a Room programme of the government. The room must be outfitted, after all.

The tax exemption is automatic filing a tax return is only necessary if your annual income exceeds £7,500. Keep in mind that if you split the income with your partner or another person, the threshold is reduced.

4. Take out an interest-only mortgage for retirement

Homeowners can remortgage with a retirement interest-only (RIO) mortgage to release equity, but they just pay off the interest.

Although the monthly payments will be less than with an interest-only mortgage, there are a few significant differences:

• All you need to do is demonstrate that you can afford the monthly interest payments.
• When you sell the residence, pass away, or enter long-term care, the remaining loan will be repaid.
• There is no maximum age for applicants.
• For individuals living off of a pension, a more feasible option

5. Refinance

A less hazardous alternative to equity release is switching to a new mortgage arrangement to release money that is secured by your property. We contrast remortgaging and equity release to determine whether you should remortgage or choose equity release.

6. Local government loans or grants

If you need money for home improvements, see what your local municipality has to offer. For this same goal, some municipal authorities provide loans or grants (free money).

Grants for disabled facilities are available expressly for tasks necessary to enable a disabled person to live independently. You might be able to obtain a "support for mortgage interest" loan (SMI) to assist with interest payments if you have taken out a loan to make home upgrades.

If you receive universal credit, pension credit, income-based jobseeker's allowance, income-related employment and support allowance, or income assistance, you may be qualified for SMI.

7. Get your job part-time.

If you are close to retiring or have already retired, working part-time to supplement your income may seem scary.

Your mindset and level of energy will play a role in this, but you can make some more money without taking on more debt.

8. Take out personal loan

A personal loan can be the ideal option if you only need a little sum of money and can repay it within the following few years.

Interest rates on personal loans start at 2.9% if you borrow £10,000 and repay it within a year. Thus, if you were eligible for that rate, you would accrue £290 in interest per year.

9. Apply for credit

A less expensive choice for a smaller amount could be to obtain a credit card with a low interest rate. You can save money by using a credit card with 0% interest on purchases instead of paying interest every month.

10. Modify your spending patterns

You could alter your usual spending patterns. Making the most of what you already have requires that you give your finances a financial detox.

For instance:

• You might easily save £1,825 a year by quitting your 10-a-day smoking habit.
• You may save £600 a year by switching from a £50 per month gym membership to free park runs and online training sessions.