Alternatives To Equity Release
Equity Release could be a good idea if you want extra money but do not want to move house. There are numerous benefits to Equity Release. However, there are also many important things to consider before deciding if it is right for you. This guide focuses on considering the alternatives to Equity Release before you make a decision.
What Are The Alternatives To Equity Release?
So, let’s consider the alternatives to Equity Release in detail.
If you want to first learn more about Equity Release and how it works read our beginner guide:
You may have a large property that no longer is being fully used. Perhaps the children now live in their own homes. So, an option could be to move into a cheaper property and use the extra money from the sale for your capital needs. Therefore, this could be one of the first alternatives to Equity Release to consider.
On the other hand, the chances are if you are reading this guide you have already thought about that. You may have lived in your property for a long time and have built close ties to the local community. Perhaps if you downsize you would have to move to another area and may lose those ties. You may simply want to stay in your current home. Plus, there are costs related to selling your current home and of buying a new house, even if the new place is cheaper. As such, this may not be one of the preferred alternatives to Equity Release.
If you have discounted moving home, Contact Us to discuss your options.
Retirement Interest Only Mortgage (RIO)
An RIO is a mortgage where you only pay interest payments each month. The RIO mortgage is designed to remain for your lifetime. The capital is repaid when the last person moves into long-term care or passes away. Of course you can repay the mortgage early from your own money or from the sale of the house. Additionally, you may be able to make ad hoc repayments of during the term. Your ad hoc payments are usually limited to 10% of your mortgage balance.
As far as alternatives to Equity Release go, a Retirement Interest Only mortgage can be a good one. Firstly, you need to be able to make regular interest payments now and into the near future.
If you want to discuss Retirement Interest Only mortgages with a human Contact Us.
Alternatively, read more about Retirement Interest Only Mortgages in our guide:
Sale of Investments or Assets
You may have financial assets or other high value items. Your assets could be sold to meet your cash needs. This could remove your need for Equity Release. As such, this is one of the alternatives to Equity Release many people do not want to think about. That said, it is still an option to tick-off the list.
Local Council Schemes
If you need money for home improvements it is worth speaking to your local council first. There may be local schemes in place to aid with home renovations.
Find your local council here: Local Council Finder
Friends and Family
If the cash needs you have are short-term, you may have friends and family willing to help you out. As professional advisors we encourage you to think about all the alternatives to Equity Release before making up your mind.
If you need extra income to help your lifestyle there could be benefits you are due. Benefits are sound alternatives to Equity Release if they meet your needs. Therefore, it’s well worth exploring this first.
Other Income or Savings
Take a review of any income or savings you may not have thought about. You should explore these alternatives to Equity Release in the first instance.
If you want to discuss any of these alternatives Contact Us for a free assessment.
How Does Equity Release Affect Benefits?
Council Tax Reduction
You may be entitled to a reduced rate of council tax if your income is low. Local councils run these schemes. Each local council has its own rules around council tax reductions. However, there are some general rules. For instance, generally pensions with less than £16,000 in savings will qualify for council tax reductions.
If you are claiming Guarantee Credit, under Pension Credit, then you may qualify for reduced council tax with more than £16,000 in savings.
If you would like to discuss this in more detail Contact Us.
Equity Release does not affect the state pension. This is because the state pension is not means tested and is there for everyone. However, Pension Credit is a means tested top-up benefit. As a result, Equity Release can affect Pension Credit either now, or in the future.
There are two parts to Pension Credit. Guarantee Credit and Savings Credit. The Government website has all the details about Pension Credit: https://www.gov.uk/pension-credit
You should also seek advice if you have Pension Credit or may be eligible in the future. If you are in receipt of Pension Credit you will also qualify for other benefits. These benefits could include Housing Benefit, Council Tax Reduction, Coin Weather payments and help with NHS services. Contact Us to assess your benefits for free.
Long-Term Care Costs
Long-term care funding assistance is means tested. It is important to consider if your capital is more than £23,250. If so, you will need to fund your own long-term care costs.
You could use Equity Release to adapt your home for your needs. This may enable you to stay there longer instead of moving into care. Bear in mind, the Equity Release needs to be repaid when the last person moves into long-term care or passes away. Contact Us to discuss your long-term care needs.
Equity Release Costs
There is usually a one-off fee to cover the advice from the advisor. This could be anything from zero up to many £1,000’s. Be aware, some advisors charge a percentage of the amount you borrow.
Simple Fast Mortgage will assess your circumstances and provide our initial advice for free. We will charge a fixed fee of £599 if you decide to apply for an Equity Release product with us. If you decide not to, then there is no fee to pay. In return, we will complete all the paperwork and manage the entire process until the Equity Release is complete.
See how Simple Fast Mortgage fees compare to our other advisors. Here is a list of fees some high profile Equity Release advisors charge:
Equity Release Supermarket, charge a fixed fee of £995
Age Partnership, charge a whopping 2.25% of the amount released. That’s £2,250 per £100,000 of loan taken.
TERE – Key Group, charge a substantial 1.99% of the amount released, so £1,999 per £100,000 of loan taken. The minimum fee charged is £1,499. Ouch.
Key Advice do not charge a fee. However, they only provide advice on their own Equity Release products. This means they won’t be able to consider products from other Equity Release providers. This narrows your choices as other products may cost you less in the long-term.
Some Equity Release providers charge a valuation fee. Other providers do not. We find you the best and cheapest Equity Release we have available. We consider all the factors. This takes into account your personal circumstances and requirements, as well as all fees due.
Lender Product Fee
Like all mortgages, some lenders charge a product fee and some do not. Where a lender does charge a product fee, a typical fee might be £699. If required, the fee can usually be added to the loan. However, any amount added to the loan will accrue interest over the mortgage term.
If you want to go ahead with Equity Release you will need to pay a fee to a solicitor to provide independent legal advice to you. The solicitor will make sure everything is in order up until the money is released.
We work with a panel of specialist Equity Release legal experts and can provide a quote for you. Simple Fast Mortgage’s legal panel are keenly priced. On average you should expect to pay circa £1,250. The benefit of using our panel is that we have more control over the legal process. As a result we can update you with their progress. Consequently this saves you contacting the solicitor separately for an update.
It’s worth noting, the solicitor has a legal obligation to ensure you understand the Equity Release before you take it out. This gives you an extra layer of protection.