What is equity release?
The most popular equity release product is the drawdown lifetime mortgage, which is where you take out a loan against your home.
You get a small initial lump sum followed by the option to take an income in the future.
You are charged interest on the money you take which can be rolled up and paid when the mortgage is repaid.
With lifetime mortgages you don’t make any repayments: instead, when you die or go into a care home your house is sold and the mortgage repaid.
Equity release may be growing in popularity, but that doesn’t necessarily mean it is the right option if you need some cash in later life.
The average interest rate on lifetime mortgages is between 6% and 7% and you may have to pay a range of charges such as arrangement fees, completion costs and legal fees.
If you need to raise additional funds, below are five alternatives you may want to consider.
1. Credit card
If you only need to borrow a relatively small amount or have a small amount of debt to clear, then a 0% credit card could allow you to retain ownership of your home and pay no interest on your borrowing.
If you want to compare the top credit card offers on the market, have a read of these:
2. Personal loan
Borrow the money via a personal loan and you will avoid all the fees associated with equity release and leave your home out of the equation.
If you want to borrow between £7,500 and £15,000, you could secure a personal loan rate as low as 5.6%.
So, it is possible to borrow reasonably large sums without having to risk your home.
Need a personal loan? Compare rates with the Post Office or the AA (this is an affiliate link, so we may receive a small payment if you take out a product, but it won't affect the rate you're offered).
3. Downsizing
If you don’t want to worry about meeting the repayments on a credit card or personal loan, another option is to downsize.
Moving to a less expensive home will allow you to realise the value of your home now.
This avoids the worry that a house market plunge in the future could wipe out the money you have left in your home after the lifetime mortgage is repaid.
This option also means you avoid going into debt and the interest charges that can come with it.
Downsizing your home for retirement? 4 things to consider first
4. Rent a room
Many people hate the idea of upping sticks and leaving their family home late in life, yet they have empty bedrooms.
Another option to get a regular income from your home is to take in a lodger, assuming you're comfortable with this given the ongoing pandemic.
Under the Government’s Rent a Room scheme, you can earn up to £7,500 a year tax-free from renting out a furnished room in your home.
You might find it an invasion of your privacy, or you might welcome the company – either way, it’ll definitely provide a regular source of income.
5. Rent out your drive
Another alternative could be renting out your drive.
More people are on the hunt for parking near their workplace or music or sporting venues.
Depending on where you live you could make £100 to £200 a month from renting out your driveway via sites such as YourParkingSpace.co.uk or JustPark.com.
There are numerous other ways you can make money – you can find out more in our article on easy ways to make money.
*This article contains affiliate links, which means we may receive a commission on any sales of products or services we write about. This article was written completely independently.