Alternatives to Equity Release for Repaying Debts
An Equity Release isn't for everyone. Perhaps you want more flexibility to pay of your debts as and when they occur? Or you may find that your circumstances, such as age, mortgage size, don't suit this type of debt solution? Either way, there are a few other alternative options of using your property as a way of paying off debts.
Consider Downsizing
One of the most common practises amongst the retired is too downsize. Downsizing is the process of selling your home and moving into a cheaper property. The advantage of doing this is that you don't have to borrow any money, which would otherwise be subject to interest, which over time can build up dramatically. If you are considering this option then you also need to think about the costs involved and the length of time it can take. If you need to pay off your debts immediately, or haven't got the upfront capital to sell your home then this could be an issue. Moving costs including estate agent fees, surveyors and solicitors can easily add up into the thousands.
Remortgage
If you don't want to move home, need access to a lump sum immediately, or don't qualify for an Equity Release then remortgaging could be a viable option. The majority of mortgage providers will only remortgage your home if you have a steady income, so if you're in retirement then this may prove difficult unless you can prove you can make the monthly repayments. The advantage remortgaging has over an Equity Release plan is that the interest rate tends to be lower. They are also more flexible with less penalty clauses for early repayment or refinancing. Obviously, you need to compare the interest rates on the mortgage in comparison to your debts and the charges associated with it. You should also consider the size of your debt, remortgaging is more suited for larger sums, as lenders tend to have minimum advances; this usually sits around £15,000. Like downsizing, there may also be some costs involved including valuation and legal fees which require you to have upfront capital.
If you are considering releasing equity in your home, or using your property to pay off your debts then make sure you take into account, upfront costs, interest rates and any penalty clauses that could affect you. These should be weighed up against the size of your debt and any interest or charges you're paying in order to work out which debt solution makes the most financial sense.
Related Articles:
- Using Equity Release to Pay Off Debts
- Equity Release as a Debt Solution
- Equity Release and its Benefits
Site is for information only and does not constitute financial advice. E&OE.
