Considering alternatives to equity release

Last reviewed 22^nd January 2024

6 min read

This guide discusses some of the alternatives to equity release. SunLife are always open in highlighting options to customers so that they can make the right choice to meet their needs. We know equity release isn’t for everyone.

If you’re considering it as an option, you’ll want to weigh up the pros and cons of releasing equity first – and always speak to an independent financial adviser.

There are plenty of equity release alternatives to think about. From remortgaging or claiming grants to downsizing or renting out a room in your house, you have other options when it comes to accessing the extra cash you need. This post looks at some of the alternatives to equity release so you can make an informed choice.

Using savings or other investments

When talking to a customer about whether equity release is right for them, SunLife's partner distributor tends to ask about their savings history to begin with. If you can access cash from savings or other investments, this may be a better option for you than equity release. Whilst it’s unlikely that you have the money you need sitting in a current account, there could be ISAs or stocks and shares that you haven’t yet considered.

Put assets up for sale

Can’t access the money you need from savings and investments? Another alternative to equity release is to consider selling some of your assets instead. Like most people, your home may be your most significant asset, but you might also have other valuable items that could be sold to fund your lifestyle.

Selling assets is a particularly worthwhile option to think about if there are any high-value pieces of property that you don’t get much use out of anymore (a common example being a car or other vehicle).

Look for grants

You may not be able to gather together the funds you need from your savings, investments, and assets. In this case, it’s worth checking whether you are eligible for any grants. For example, the Government, local councils, and charities may provide grants to help cover things like health-related home improvements.

If you’re looking to make a small adaptation to your property such as adding a grab rail or ramp, your local council may be able to provide you with the money you need. In some cases, they may even support you with more extensive modifications such as the installation of a wet room – get in touch with your local council to find out more.

There are plenty of other grants run by charities to help older people who have limited savings, including Grants for Older People(www.fote.org.uk opens in a new tab) from Friends of the Elderly.

Check your state benefit entitlement

Rather than releasing equity as your first port of call, you may be able to access some additional funds by claiming any state benefits you are entitled to.

At the very least, you should claim your State Pension once you reach the right age (currently 66, rising to 67 by 2028). You can check your State Pension age(www.gov.uk opens in a new tab) using the Government’s tool.

Some people who are claiming State Pension but are on a low income will also be eligible for Pension Credit, which tops up weekly income. Check the gov.uk Pension Credit page(www.gov.uk opens in a new tab) to find out current rates and if you’re eligible.

Those who are claiming Pension Credit are also able to get a range of other help including:

• Support for Mortgage Interest (SMI)(www.gov.uk opens in a new tab)
• Council Tax Reduction(www.gov.uk opens in a new tab)
• Support with heating costs(www.citizensadvice.org.uk opens in a new tab)
• A free TV licence(www.tvlicensing.co.uk opens in a new tab) once you reach 75.

If you have a disability, you may also be eligible for other state benefits such as Attendance Allowance(www.gov.uk opens in a new tab) and Personal Independence Payment (PIP)(www.gov.uk opens in a new tab).

Keep working or go part-time

If you’re yet to retire, you could consider staying in your role a bit longer to build up the funds you need as an alternative to equity release. In cases where you just need a small amount of extra cash, you might only need to keep working on a part-time basis.

Even for those who have already retired, you may have the option to return to work in some capacity and increase your income if you feel able to do so. This could take the form of a part-time consultative role at your old workplace or an entirely new position altogether.

Remortgage or amend an existing mortgage

So far, we’ve been looking at equity release alternatives that don’t relate to your home. As your property is probably your biggest asset, it could be the means for you to access the funds you need. And this doesn’t necessarily have to involve equity release.

One often-overlooked option you might want to consider is remortgaging or changing the terms of your existing mortgage. You could try discussing your situation with your provider and seeing what they can do to help you access the funds you need.

If it isn’t possible to amend your mortgage or get the cash you need another way, then releasing equity may be an option for you to consider. Take a look at our equity release page for more information.

Retirement Interest-Only (RIO) mortgage vs equity release

Designed for older borrowers, a Retirement Interest-Only (RIO) mortgage is another equity release alternative that you could consider.

As the name suggests, this type of mortgage requires you to pay off monthly interest payments. Unlike other types, RIO mortgages have no set date for you to pay them back by – instead, you just have to keep up with the monthly interest payments until you move into long-term care or pass away.

You only pay off the interest with a RIO mortgage, meaning that you’ll still owe the full amount that you borrowed at the end of the term (i.e. when you move into care or die). At this point, the money is usually taken from the sale of the house, so you may not be able to leave the property to your family and their inheritance could be affected.

Whereas an equity release mortgage accumulates interest, with a RIO mortgage you are paying off the interest as you go. This means that the overall cost of the loan can be lower with this type of mortgage.

A RIO mortgage offers some benefits by comparison to equity release, but there are also some drawbacks to be aware of:

• To be eligible for a RIO mortgage, you usually need to own at least 50% equity in your home and be over a certain age (many providers require you to be at least 65).
• Unlike with equity release, you’ll need to keep up with the regular monthly payments.
• As a RIO mortgage is secured on your home, it could be repossessed if you can’t make the payments. By contrast, equity release allows you to stay in your own home without making payments.

Downsizing

Downsizing is another common equity release alternative. You may already have been starting to think about the possibility of moving to a smaller home, particularly if you have health or mobility issues that would make a bungalow a better option for you.

Buying a smaller property in a different area and selling your old home could be a way for you to unlock the cash you need.

Renting out a room in your house

Depending on how comfortable you feel about this, one potential alternative to equity release could be to rent out a room in your house.

The Government’s Rent a Room Scheme can help you out here. This lets you earn up to £7,500 a year tax-free by letting out furnished accommodation in your home. Take a look at the gov.uk Rent a Room Scheme page(www.gov.uk opens in a new tab) to learn more.

Next steps

Found this guide to equity release alternatives useful? You may want to continue reading our other resources:

• What to do if you’re retired and in debt
• Tips to boost your pension pot
• Our simple guide to retirement

If you think that releasing equity might be the right option for you after all, visit our equity release page to learn more about how the process could work for you.

The thoughts and opinions expressed in the page are those of the authors, intended to be informative, and do not necessarily reflect the official policy or position of SunLife. See our Terms of Use for more info.