Equity release can be a useful financial tool for homeowners in later life, but it is not the only option — and it is not always the best one. Before committing to a plan that will affect your estate, your benefits, and your family's inheritance, it is important to explore the alternatives thoroughly. In fact, any qualified equity release adviser is required by the FCA to discuss suitable alternatives with you before recommending a plan.
For background on how equity release works, read our complete guide to equity release.
Is Downsizing a Better Option Than Equity Release?
Downsizing is the most straightforward alternative — it gives you a clean break with no debt and no interest to pay. You sell your current home, buy a smaller or less expensive property, and keep the difference (minus costs) as cash. The average UK homeowner can free up around £97,000 by downsizing.
Downsizing has the advantage of being a clean break: no loan, no interest, and no impact on means-tested benefits (beyond the cash you hold). However, it does require you to move, which can be emotionally and physically challenging, particularly if you have lived in your home for many years.
Advantages of Downsizing
- No debt or interest to worry about
- Full ownership of a smaller, more manageable property
- Potential to reduce running costs (energy, council tax, maintenance)
- No impact on benefits entitlement (beyond savings held)
- Full inheritance preserved (minus the price difference)
Drawbacks of Downsizing
- Emotional upheaval of leaving your home
- Moving costs: estate agent fees, stamp duty, solicitor, removals
- Stamp duty may apply on the new property
- Suitable smaller properties may be hard to find locally
- Property market conditions may not be favourable
When calculating the proceeds from downsizing, remember to factor in all costs: estate agent fees (typically 1%–2% of sale price), stamp duty on the new property, solicitor fees, removal costs, and any refurbishment needed on the new home. These can easily amount to £15,000–£30,000 or more.
What Is a Retirement Interest-Only (RIO) Mortgage?
A RIO mortgage lets you borrow against your home with monthly interest payments only — the loan balance stays fixed (unlike equity release, where compound interest causes the debt to grow). It is designed for borrowers typically aged 55 and over. The capital is repaid when the property is sold — usually when you pass away, move into care, or choose to sell.
The key advantage of a RIO over equity release is that, because you are paying the interest each month, the loan balance does not grow over time. This means compound interest is not an issue, and more of your property's value is preserved for your estate.
The main requirement is that you must be able to afford the monthly interest payments from your pension, savings, or other income. The lender will carry out an affordability assessment to confirm this. If your income is limited, a RIO may not be an option.
Retirement interest-only mortgages were introduced to give older borrowers a middle ground between standard mortgages and equity release — they offer the certainty of fixed debt without compound interest growth, provided you can afford the monthly payments.
Can I Remortgage Instead of Taking Equity Release?
Yes — remortgaging typically offers lower interest rates than equity release, making it a more cost-effective option if you can meet the affordability criteria. If you have an existing mortgage that is nearing the end of its term, or if your circumstances allow you to borrow more, remortgaging could allow you to release additional funds. You would replace your current mortgage with a new, larger one and receive the difference as cash.
Standard mortgage rates are generally lower than equity release rates, which makes this an attractive option on paper. However, there are important considerations:
- You must meet the lender's affordability criteria, including demonstrating sufficient income to cover the monthly repayments
- Most standard mortgages have a maximum term that must end at or before a certain age (though some lenders now extend to 75 or 80)
- Early repayment charges on your existing mortgage could add to the cost of switching
- If you are retired, proving affordability based on pension income alone can be challenging with some lenders
Should I Sell My Home and Rent Instead of Equity Release?
Selling and renting releases the maximum amount of equity — your entire property value minus sale costs — with no debt or interest to manage. You could use the proceeds to fund your retirement, invest for income, or support your family.
The obvious downside is that you no longer own a property, which means you have ongoing rent to pay, you lose the potential for future house price growth, and you may feel less secure without the permanence of home ownership. Renting in later life can also be uncertain, as landlords may sell or increase rent over time.
Can Family Help Financially Instead of Equity Release?
Yes — in some cases, family members may be willing and able to help with a gift, a private loan, or by contributing towards specific costs such as home improvements or care needs. This avoids the compound interest costs of equity release and can help preserve the family home for the future.
While this can be a practical solution, it is important to consider the potential for family disagreements and to formalise any arrangement in writing. Gifts may also have implications for inheritance tax if the giver passes away within seven years.
Are There Council Grants Available Instead of Equity Release?
If you need money specifically for home adaptations or essential repairs, you may be eligible for grants or financial support from your local authority. These are free and do not need to be repaid. The most relevant schemes for older homeowners include:
- Disabled Facilities Grant (DFG): A means-tested grant of up to £30,000 (in England) to fund essential home adaptations such as stairlifts, wet rooms, or widened doorways.
- Home improvement loans and grants: Some local authorities offer interest-free or low-interest loans for essential repairs and improvements.
- Warm Home Discount and energy efficiency schemes: Help with heating costs and insulation improvements for eligible homeowners.
These grants do not cover every need, but they are worth exploring if your reason for considering equity release is specifically to fund home adaptations or essential repairs.
Your equity release adviser is required by the FCA to discuss suitable alternatives with you before making a recommendation. If an adviser recommends equity release without exploring whether any of these alternatives could meet your needs, this is a concern and you should seek a second opinion.
How Do the Alternatives to Equity Release Compare?
| Option | Key Advantage | Main Drawback |
|---|---|---|
| Equity release | Stay in your home, no monthly payments | Compound interest reduces your estate |
| Downsizing | No debt, keep full proceeds | Must move home |
| RIO mortgage | No compound interest, loan stays fixed | Must afford monthly interest payments |
| Remortgaging | Lower interest rates than equity release | Monthly repayments required, age limits |
| Selling and renting | Releases maximum equity | No home ownership, ongoing rent costs |
| Family help | No interest or debt involved | Potential for family disagreements |
| Council grants | Free money for specific adaptations | Limited scope and means-tested |
How Do I Decide Which Equity Release Alternative Is Best?
The best option depends on your personal circumstances, your financial needs, your health, and your priorities — there is no single right answer. The most important thing is to take your time, consider all options, and seek professional advice before committing to any course of action.
- 01
Clarify your needs
Be specific about why you need the money, how much you need, and whether the need is immediate or ongoing. This helps narrow down which options are realistic.
- 02
Explore free guidance
Visit MoneyHelper (moneyhelper.org.uk) for impartial information on all of these options, including a free equity release advice session.
- 03
Speak to a qualified adviser
A qualified equity release adviser will help you compare the options and identify the most suitable route for your situation. They must discuss alternatives before recommending equity release.
- 04
Involve your family
Where possible, discuss your plans with your family. They may have practical suggestions, and it avoids surprises later about the impact on inheritance.
For a balanced view of the advantages and disadvantages of equity release specifically, read our guide to the pros and cons of equity release. If you have an existing mortgage and are considering equity release, our guide on equity release with an existing mortgage covers what you need to know.
- Equity release is not the only way to access your property wealth — always consider alternatives before committing.
- Downsizing is the most straightforward option but requires you to move and involves significant transaction costs.
- A retirement interest-only mortgage avoids compound interest but requires you to afford monthly payments.
- Remortgaging offers lower rates but has age limits and requires proof of affordability.
- Your adviser is legally required to discuss alternatives with you before recommending equity release.