We look at some creative equity release alternatives in detail
Equity release is an increasingly popular choice to boost income later in life. But what areyour other options if you need to raise some extra money? We look at alternatives to equityrelease that might suit you better.
Budgeting
If you're struggling to live within your means in retirement, you could start with theobvious, by looking at your income and regular outgoings to see if there are any areas whereyou could cut back. For example, you could:
- Look at subscriptions and direct debits to see if there's anything you could cancel.
- Review the contracts you have with mobile phone and other providers to see if there are cheaper deals.
- Check your insurance policies to see if you can make any savings.
You may not raise a large amount of capital this way, but you can look for ways to make yourcurrent income go further. The MoneySavingExpert website is a good placeto start for helpful budgeting advice.
Benefits
If you're used to being financially independent, you might not immediately think oflooking to the state for any benefits that you might be entitled to. As part of the Saga Equity Releaseservice, provided by HUB Financial Solutions Limited, you'll receive a free state benefits check throughan adviser to ensure you're claiming everything you're entitled to.
According to popular website entitledto, whichhelps people determine if they can claim from national and local government, about £15billion of benefits remain unclaimed each year. Start by reviewing your situation with thisfreebenefit calculator.
Grants
Some local authorities and charities make grants available to people who need to make changesto their home so that they can go on living there independently. This is worth investigatingfurther if this applies to you.
Local councils might help pay for small adaptations such as grab rails or ramps, and you mightbe able to get help for more expensive adaptations as well.
There are nearly 200 Home Improvement Agencies who offer advice and support so that you canstay in your own home for longer, and many charities who offer grants. Find a local HIA or find out more about the Independence at Home charity.
Savings
Many people have some savings or investments set aside for a rainy day in retirement. Youmight want to think about whether using some or all of these savings would help yoursituation as alternatives to equity release.
You'll need to investigate the tax implications of following this route and it would bebest to seek independent financial advice before going ahead.
Sell assets
For most people, their home is the most expensive asset they own, but there may be otheritems that will help you release money when you need it.
We've all got stuff that we no longer need or can find a use for, from jewellery we nolonger wear, to household appliances and even additional cars. Are there items thatdon't have sentimental value that you could sell? From selling through car boot sales to independentspecialists, it's worth thinking about whether you have anything that can go.
Continue earning
Not everyone is ready to stop work at retirement and do nothing for the rest of their life.You could get a part-time job or carry on with a ‘side-hustle’ that earns moneyfor you and lets you keep working on that side project you love.
Many companies now have schemes that actively encourage more experienced workers to join orcontinue in employment, and it has the benefit of keeping you involved with other people andactive for longer.
Rent out a room
If your home has more space than you strictly need, you could think about renting out a spareroom to a lodger or even consider listing the room on Airbnb.
Under the government's Rent a Roomscheme you can earn up to £7,500 a year from a tenant before any tax is due on theproceeds. This could bring in some much-needed extra money (and company) while allowing youto remain in your current property.
Downsizing
Once your children have grown up and left home, you might have more space in your currenthouse than you need. Downsizing by selling and moving to a smaller, less expensive propertycan free up some extra cash.
There are some disadvantages to consider, including the market value of your house when youcome to sell, the length of time it can take to successfully buy and sell property, and theextra costs of moving such as estate agent and solicitor fees and stamp duty.
Plus, moving may even lead to having to buy new furniture or redecorate to suit your tastes.And don't forget to take into consideration the fact that you'll have to leave whatmight be your longstanding family home.
Help from your family
You could talk to family members about your options for freeing up some extra cash. Althoughthis might not be the easiest subject to broach, they may prefer to lend or give you moneyas an alternative to equity release, as the latter option would end up reducing the value of the estate and eating into their eventual inheritance.
If they do decide to send some money your way, make sure you're both clear about whetheryou're receiving the cash as a gift or a loan to avoid any awkwardness later down the line.
Borrowing
You could look at forms of borrowing as an alternative to equity release. Even if you're retiredyou can take out a personal loan against your residence, provided you have enough income to makefuture repayments. You can arrange a loan as a short-term solution as and when you need to,unlike the lifetime commitment of equity release.
However, interest rates on secured personal loans are more expensive than mortgages and if youcan't keep up with monthly payments you risk having your property repossessed. Unsecuredloans such as credit card debts give you the possibility or borrowing money without any formof collateral.
Whichever option you choose, make sure that you have enough income to make repayments beforegoing ahead. Speak to an expert adviser, who can give you tips and assess your personal finance.
Retirement interest-only mortgage
You could look at this type of mortgage, which is only available on your main home and worksin a similar way to a standard interest-only mortgage. With retirement interest-onlymortgages:
- Like a lifetime mortgage, the loan is only paid off when you die, move into long-term care, or sell your house.
- You only have to prove you can afford to pay the monthly interest payments.
- Borrowers over 55 might find them easier to get than a standard interest-only mortgage.
If you've considered these alternatives to equity release and still want to explore theequity release option, it's time to check out Saga Equity Release – a no-obligation, no-pressure advice service for those aged 55 or over with a UK home worth at least £70,000. The product available through Saga Equity Release is the Saga Lifetime Mortgage. A lifetime mortgage is a loan secured against your home.
As part of the service, the adviser will consider alternatives to equity release based on your personal circ*mstances. Please be aware that equity release will reduce the value of your estate and may affect your entitlement to means-tested state benefits.
