When it comes to releasing equity from your home, you should consider all options.
Downsize your home
This offers a relatively easy way to raise the funds you need now. Of course, you’d need to consider both the emotional attachment you (and your family) have with your current home, plus the cost of moving, which sits at a UK-wide average rate of around £9,000.
Borrowing from family members
Rather than paying the interest rates from borrowing from money lenders or the bank. You could borrow the money from your loved ones and avoid having to pay interest. Of course, if you wanted to, you could agree an interest rate between yourselves. However, if you intend to borrow a lot of money from your family you need to make sure it won’t financially impair them. Also, what would happen if you can’t repay the money back?
Lenders recognise that we have an ageing population and are starting to provide different mortgage options for those entering, or who may already be in, their retirement years. It is worth noting that you will need to meet the affordability criteria to show that you can pay either the monthly interest, or the interest plus capital repayments. Alternatively, Equity Release products are also available. Some of these products do not require monthly repayments to be made and instead, the interest can be rolled up and added to the balance of the loan. You should consult a mortgage adviser before a decision like this is made.
Existing or potential State Benefits and Local Authority Grants
If you’re already claiming state benefits, and some of those are means-tested, then raising funds may affect your ability to continue to claim (or reduce the regular payments). Additionally, there may be some benefits that you should be claiming for but are not aware of.
Consider taking in a lodger
If you don’t have an issue with someone else living in your home, then this could be a revenue source. The Rent a Room scheme allows you to earn £7,500 per year tax-free by letting out a room in your home.
Look at your existing pensions, investments and savings portfolios
You’ll need to take professional advice to decide if securing money this way is a better option. Also, across your lifetime, there’s a chance that you may have forgotten about a long-held investment, or a small pension from a past employer.
Reference – BL068 – Jul -2019