Our Guide to the Alternatives to Equity Release

Equity Tree Guide to equity release alternatives
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For many people, equity release is the perfect way to raise money against their property, but there are alternatives. It will depend on the level of funding you require, your financial position and potentially the use of collateral as security. If traditional equity release is not for you don’t worry, there are other options to consider.

Thankfully there are options to traditional equity release schemes with more and more people looking to retain full control over their home as part of their family’s inheritance.

Some of the options available may be conditional upon your financial status, but there are a number to consider.

Continue reading to get all the nitty-gritty details about all the alternatives.

Downsizing Your Property

Many younger and older homeowners may look to downsize their property if they require additional funds. The idea is simple; you have a property worth £250,000 with a £100,000 mortgage.

You sell the property, pay off the mortgage and acquire a smaller property for £120,000. After repaying the initial mortgage and paying for your new home, this will leave £30,000 surplus funds.

So, not only have you paid off the mortgage and downsized to a more suitable property but you have paid for this in cash and still have £30,000 leftover.

Standard Remortgage

While a remortgage is not marketed as an equity release option, it is effectively that in all but name. For example, you have a property worth £250,000 with a £50,000 outstanding mortgage. You remortgage the property on a 50% LTV ratio raising £125,000.

The initial mortgage is repaid at the cost of £50,000, leaving £75,000 in surplus capital, and you still have £125,000 equity in your property. These figures may seem a little unrealistic, but if you acquired property back in the 1980s or the 1990s, it is perfectly feasible.

Not only will you have seen an increase in the value of your property, but with a repayment mortgage, you will also have paid off a significant element of the mortgage capital.

Return to Work

If some of the traditional equity release options are not available, then it may be time to consider a return to work. This is probably more appropriate for older homeowners who were looking to release equity and enjoy their retirement.

Unfortunately, if equity release options are unavailable for whatever reason, then additional income would be required to make ends meet. It is true that we are living longer and working longer, but also the cost of living continues to rise. While not a perfect solution, a return to work may be the only option for many people.

Taking in a Tenant

Over the last few years, we have seen a significant tightening of regulations regarding rental properties very much in favour of the tenant. So, while taking in a tenant may be a feasible option when looking to supplement your income, you need to think long and hard before committing yourself. Could you share your home with somebody else?

How would you check the suitability of a potential tenant? What would you do if they missed rental payments?

In theory, taking in a tenant may seem like the perfect solution for many people, but it can turn into a difficult and challenging time. By all means, consider this as a feasible option but do your research!

Accepting Financial Assistance From Family

While not everybody will have the option of accepting financial assistance from their families, it is fair to say that not everybody would be comfortable going down this route.

However, if you flip the argument, you have been there for your children, they have never wanted for anything, so maybe they might appreciate the opportunity to help you?

They say the pride comes before a fall, but if you do require financial assistance maybe, just maybe, this is a potential option?

Home Improvement Grants

One of the more common reasons for withdrawing equity from your property is to fund home improvements which are effectively a long-term investment in your home. Managed correctly, this should enhance the value of your property going forward and makes perfect sense.

Unfortunately, as a consequence of your financial status or other issues, it may not always be possible to withdraw equity from your property to fund home improvements. But there may be a viable alternative!

Many local authorities operate home improvement schemes which offer grants to those looking to improve their home, often with one eye on the environment and “green technology”. Therefore it may be that you are entitled to apply for one of these grants which are non-repayable.

This is a win-win situation; local authorities are seen to be “doing their bit for the environment” while homeowners are adding to the value of their property.

Are You Claiming All of Your Benefits?

The UK benefits system can be complicated at the best of times. Some benefits are means-tested, others are not overly promoted, and many people fail to realise the benefits they are missing out on.

There is also the issue of pride, but as we mentioned above, it often comes before a fall. If you need additional funds, and equity release is not currently possible, there’s nothing wrong with checking that you are taking your full entitlement from the benefits system.

Revisit Your Budget

Last but not least, there may be ways and means of revisiting your household budget in order to save funds on a monthly basis – which can plug any short-term cash flow issues. Do you really need to spend £100 a month on Sky TV?

Is there a better deal available on your mobile phone? Could you combine your insurance policies at a cheaper rate?

While there is a fine line between cutting your budget to the bone and living a life, the vast majority of us will be able to find significant savings if we are honest and look hard enough.

If you could save £100 a month, this is £1200 a year which may be enough to allow you to retain your property equity going forward. Many people discount revisiting their budget as a means of saving money, but you might be surprised how much you can save!

Summary

There are numerous ways and means of raising additional capital if, for some reason, the more focused equity release options are not available. Simple issues such as revisiting your household budget, maximising your benefits or even downsizing your property can make a huge difference to your financial status.

The less financial pressure you are under, the more chance you can enjoy life to the full – especially those coming to the end of their working life.

How Can Equity Tree Help?

Here at Equity Tree, we have partnered with some of the UK’s leading Equity Release broker companies.

They have already helped thousands of people release equity already, and they can do the same for you.

Choosing an independent adviser means they won’t recommend a scheme unless they are sure it is in your best interests. Their advice is also regulated by the FCA, which gives you an additional layer of protection.

If you would like to speak to one of these equity release companies, click on the below and answer the questions.

Mark Benson
Mark Benson
Mark has been writing professionally for over ten years for the financial sector. Having started in the financial world as a stock-broker in central London and then moving to equities trader Mark is one of our senior financial writers who have a vast knowledge of multiple financial sectors.
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