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Discussion of Alternatives to Lifetime Mortgages
Couldn’t we just borrow money to help us? |
Yes. Even when retired, banks and building societies will offer loans and even interest only mortgages. You should bear in mind that the repayments will increase your outgoings per month, and so add further pressure to balancing the budget. Alternatively, some of your family may even be prepared to lend you money. Whilst this latter option should be the cheapest, many people decide not borrow from their family, preferring instead to profit from their own shrewd investment.
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Why not release capital by moving to a smaller property? |
For those with large detached properties, moving to a smaller property could release considerable equity. Also for those who are willing to move from their own area to a cheaper one, considerable equity may be able to be released. In either case, moving would normally provide the cheapest option.
However, if you prefer not to move away from family and friends, or have a typical three-bedroom semi you may find that moving to somewhere smaller, especially once the costs of estate agents, solicitors and removals are taken into account, may not release sufficient equity.
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How about using existing savings? |
Certainly if you have existing savings or investments, you should consider whether to use these to help you first especially if the returns on these investments are liable to fluctuations and/or are not returning (net of charges and tax) more than the interest which would be added to the loan.
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Applying for state benefits or grants? |
If you are looking for extra income, and have not tried claiming any means tested benefits such as Pension Credit/Income Support, Council Tax Benefit etc, then you should certainly first look to see if you would qualify and check to see if the amount you would qualify for would meet your needs before proceeding with Equity Release. However should you not qualify, or your need is for lump sums and you could still survive if you lost any of these benefits you may have been entitled to or would now fail to qualify for, you may feel that it is still better to proceed with Equity Release. However we would strongly recommend that you should first check with the Benefits Agency/Pension Service or Citizen Advice Bureau, before applying for Equity Release.
Likewise if you want to make home improvements and need a lump sum you should first check to see if you would qualify for a Local Authority or Charitable Grant.
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Could we generate extra income by renting a room in our property? |
Whilst this can produce valuable extra income and provide companionship, you may find your need is more for a lump sum or you may simply prefer not to share your home with a stranger.
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“Equity release” includes home reversions plans and lifetime mortgages. To understand the features and risks ask for a personalised illustration |
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