Because equity release is a major, costly decision, it is essential to consider the alternatives first, and a qualified adviser must do so. This guide explains alternatives to equity release: downsizing, retirement mortgages, pension cash, using savings, family help, unclaimed benefits and letting a room, each of which may suit your needs.
Why consider alternatives
Equity release is expensive over time and reduces your inheritance, so it should only be chosen after considering whether a cheaper or simpler alternative would meet your needs, as our guide to equity release explained explains. Indeed, a qualified adviser is required to consider alternatives before recommending equity release. So exploring the options below is an essential step, not an optional one, before releasing equity.
Downsizing
Downsizing, selling your home and buying a smaller or cheaper one, releases equity outright without any borrowing or interest, and lowers your running costs, as our guide to downsizing in retirement explains. For those willing to move, it is often the simplest and cheapest way to free up money from a home, preserving more of your wealth than equity release. It is usually the first alternative an adviser will weigh.
A retirement mortgage
If you have enough retirement income, a retirement interest-only mortgage or a standard later life mortgage lets you borrow while paying the interest, keeping the debt fixed and costing far less than rolled-up equity release, as our guide to RIO mortgages explains. So for those who can afford payments, a retirement mortgage is often a cheaper, more estate-friendly alternative that achieves a similar goal of accessing funds.
Pension and savings
Using your pension or savings may be cheaper than borrowing against your home. From age 55 (rising to 57 from 2028), you can usually take 25% of a defined contribution pension as tax-free cash, and drawing on savings or investments avoids interest altogether. So before equity release, it is worth considering whether your pension, savings or investments could meet your need at lower cost, as part of weighing all your resources.
Family help
Sometimes family can help instead, through a gift or a formal loan, perhaps documented by a solicitor, which can be cheaper and keep wealth within the family, as our guide to family money relates. Since family are affected by the inheritance impact of equity release, they may prefer to help directly. Discussing your needs with family can reveal alternatives that suit everyone better than borrowing against your home.
Unclaimed benefits
Many older people miss out on benefits they are entitled to, such as Pension Credit, which can open the door to other support like Council Tax Reduction and help with housing costs. A successful claim can ease your finances without borrowing. So before equity release, it is worth checking whether you are claiming all the benefits you are entitled to, as this can sometimes meet a need that might otherwise prompt borrowing.
Letting a room
Letting a spare room can provide regular income, and the government's Rent a Room scheme lets you earn a set amount each year tax-free from letting a furnished room in your home. This can supplement your income without borrowing against your property. For those with a spare room and willingness to share their home, this is another alternative that can ease finances in retirement without the cost of equity release.
Comparing the cost
When weighing the alternatives, comparing the cost over time is revealing: downsizing and using savings involve no interest, a retirement mortgage charges interest but the debt does not grow if you pay it, while equity release compounds, as our guide to interest roll-up explains. So on cost alone, several alternatives beat equity release. Comparing the long-term cost of each option helps show whether an alternative would serve you better and more cheaply.
Combining options
Sometimes the best answer is a combination, such as claiming unclaimed benefits and letting a room to boost income, or downsizing and using a small retirement mortgage, rather than a single large equity release. So you need not choose just one route. Considering how a mix of alternatives could meet your needs, possibly avoiding or reducing equity release, is something a good adviser will explore with you.
Equity release as a considered choice
Because cheaper or more estate-friendly alternatives often exist, equity release is best viewed as a considered choice made after weighing them, rather than a first resort, as our guide to the pros and cons explains. For some, after considering everything, equity release genuinely is the best option. The point is to reach it through proper consideration of the alternatives, which is exactly what a qualified adviser must help you do.
Alternatives for care costs
If the need is to fund care, there can be particular alternatives and sources of support, including local authority help depending on your means, and specific financial products, so it is worth taking specialist advice rather than assuming equity release is the answer. Care funding is a complex area with its own rules. So if care costs are the driver, seeking advice on the dedicated options is especially important before releasing equity.
Checking your benefits first
Because many older people miss out on benefits they are entitled to, checking your entitlement, for example to Pension Credit and the support it can unlock, is a worthwhile first step that may ease your finances without any borrowing, as our guide to equity release relates. So before considering equity release, it is well worth ensuring you are claiming everything you are entitled to, which can sometimes meet the need entirely.
Getting advice on the alternatives
A qualified later life adviser is required to consider the alternatives before recommending equity release, and can help you weigh which option, or combination, suits you best, as our guide to later life advice explains. So you do not have to assess all these options alone. Taking advice ensures the alternatives are properly explored, which is both a regulatory safeguard and a practical way to find the best route for your needs.
The right route for you
The best route depends entirely on your circumstances: your willingness to move, your income, your savings, your family situation and your priorities for inheritance, as our guide to how equity release works relates. For some, after weighing everything, equity release is right; for many others, an alternative serves better. The point of considering the alternatives is to reach the option that genuinely suits you, which is a decision worth taking time and advice over.
Treat equity release as the option you reach only after the alternatives have been properly weighed, and you give yourself the best chance of meeting your needs in the cheapest, most estate-friendly way available to you.
In short
Alternatives to equity release, which an adviser must consider, include downsizing (releasing cash without debt), a retirement interest-only or standard later life mortgage (cheaper if you can afford payments), using pension tax-free cash or savings, family help through a gift or loan, claiming unclaimed benefits like Pension Credit, and letting a room for tax-free income. Many of these are cheaper or preserve more inheritance, so they are well worth considering first.
Where to get help and next steps
Read our guides to downsizing in retirement, RIO mortgages, and equity release. This is general information, not financial advice; rates and rules change, so seek qualified advice.