Are There Alternatives To Consider Before Taking Equity Release?
Equity release schemes should not be taken lightly and it’s important that all alternative forms of lending and possible solutions explored which could save the estate a substantial amount of money at the end of the day. Although equity release is not the product of last resort some people say, there maybe better alternatives which could be more suitable given your position at the time.
As an equity release advisory service, Interest Only Lifetime Mortgage has a concise 8-point guide as to the equity release alternatives:-
1. Apply for any state benefits – this could help increase income by claiming any benefits that you may qualify that you may not have known were available. This could be such common benefits such as pension or savings credit, council tax reduction or even disability benefits.
2. Downsizing to smaller house – by moving to a property of lower in value than the one currently inhabited, it would raise additional cash to the tune of the difference between the two house values. This could solve any financial difficulties, however bear in mind moving costs such as estate agent fees, solicitors & stamp duty would be incurred.
3. Use any available investments – before taking a release of equity, your adviser would conduct a questionnaire to assess you financial status. If there was significant savings or investments in place it would be the advisers duty to suggest these be used before releasing equity. By delaying the start of equity release for few years by using savings instead would save many £1,000’s in the long run.
4. Asking family for financial assistance – as the children are likely to be the beneficiaries, it would be in there interests to inhibit equity release plans if they are concerned by what inheritance they will get. Therefore, if they raised the money instead it would stave off the need. Additionally, children could assist in paying off the interest off the scheme to halt the increase in the future balance.
5. Obtain a grant for home improvements – dependent upon your level of income, you may be able to claim for financial assistance with things such as lift or cavity wall insulation. So before paying, always check with the local authority if incomes are low and help may be at hand.
6. Reduction in expenditures – if insufficient income is the issue, and equity release is being looked upon to solve any shortfall, then existing expenditures should be analysed. By making cut backs in expenditures such as shopping round for cheaper utilities, reviewing house & car insurance or even shopping habits can go towards bridging the shortfall that exists.
7. Take in a lodger – the governments rent a room scheme can help provide an extra income if let out. Even if not applied for, having a tenant in the house could bring additional funds which could potentially solve any financial shortfall.
8. Consider other types of finance – dependent on disposable income and age, certain financial institutions could still offer standard personal loans, credit cards, HP or even a remortgage. These will incur additional monthly expenses & due to age may only be available over the short term. If they are an option ensure they will be affordable for the whole term and not just the present, such as retirement where income will fall accordingly.