If you’re a pensioner looking to raise money and considering equity release, hold that thought! There are alternative ways to get your hands on some extra cash. Lovemoney suggests five options you might not have considered.
What’s Equity Release?
Before we get into those enticing alternatives, let’s remind ourselves about equity release. It’s becoming increasingly popular in the UK. The go-to choice for most people is the drawdown lifetime mortgage, where you borrow money against your home’s value. You get a small sum upfront, with the option to draw more down the line.
Sounds okay, right? Here’s the catch: Interest. You’ll be charged interest on the amount you take out, and you don’t pay it back straight away. Instead, when you either move to a care home or pass away, your home is sold off to pay back the loan.
However, the average interest rate for these mortgages floats between 6% and 7%. Plus, you might find yourself paying a bunch of other costs like arrangement fees, legal fees, and completion costs.
5 Alternatives to Consider
1. Grab a 0% Credit Card
Got a small debt? Need a bit of cash for something urgent? Why not consider a 0% credit card? You won’t pay interest on your borrowing, and most importantly, your home remains untouched.
2. Go Personal with a Loan
Consider borrowing through a personal loan. Say goodbye to all those equity release fees, and keep your home right where it is. For amounts between £7,500 and £15,000, you can snag rates as low as 5.6%. Borrow without putting your house on the line!
3. Consider Downsizing
Not keen on loan repayments? Another route is to shift to a more affordable home. This move lets you access your home’s value immediately. And the bonus? You dodge the potential pitfall of a future housing market crash eating into your home’s value post-mortgage.
4. Fancy Renting a Room?
We get it; leaving a family home filled with memories can be tough. If you’ve got an empty bedroom or two, why not bring in a lodger? Thanks to the Government’s Rent a Room scheme, you can earn up to £7,500 annually, tax-free, from renting out a furnished room in your house. A potential win-win – extra cash and some company!
5. Driveway = Cash Generator
If you live near offices, music hubs, or sports venues, this one’s a gold mine. More folks than ever are seeking convenient parking. Platforms like YourParkingSpace.co.uk and JustPark.com can help you rent out your driveway. Depending on your location, this could translate to £100 to £200 every month!
The Bottom Line
Times change, and so do financial strategies. If equity release doesn’t quite sit right with you, there’s a world of alternatives out there. Remember, your home is more than bricks and mortar; it’s memories, it’s legacy. Before making any financial decisions, always weigh your options.