What's the cheapest alternative to equity release?

For most people the cheapest option is using existing pension or savings before borrowing against the home. The 25% tax-free pension lump sum on a £100k pot is £25,000 you can take from age 55 (57 from April 2028) with no interest, no fees and no debt. If a pension is not available, downsizing usually beats equity release because a one-off transaction cost of 5–7% of the new property value is far less than a 6.95% interest rate rolling up for 15–20 years. Equity Release Council Q1 2026 data shows the average new-business rate is 6.95% — at that rate, a £60,000 lifetime mortgage doubles to roughly £120,000 owed in around 10 years.

How does a retirement interest-only (RIO) mortgage compare to equity release?

A RIO is the same idea as equity release in that the loan is repaid when you sell the home, die or go into long-term care — but you pay the interest each month, so the capital balance never grows. Best-buy RIO rates on Moneyfacts in May 2026 are around 5.45–5.85% on 5-year fixes, versus 6.95% (Equity Release Council Q1 2026 weighted average) for a lifetime mortgage. Over 20 years, paying interest monthly on a £60,000 RIO at 5.65% costs around £67,800 in interest — your estate still owes £60,000. Letting the same £60,000 roll up on a lifetime mortgage at 6.95% leaves your estate owing about £229,500. The catch with RIO: you must pass an affordability assessment showing you can sustain monthly payments for life on retirement income.

Is downsizing better than equity release?

Financially, almost always yes. Selling a £400,000 home and buying a £250,000 retirement home releases £150,000 minus stamp duty, agent, legal and removal costs — typically 5–7% of the new property's value. Net cash released is roughly £135,000 with no ongoing interest cost. The same £135,000 borrowed via a lifetime mortgage at 6.95% rolls up to about £515,000 owed over 20 years. Downsizing's real costs are non-financial: leaving a neighbourhood, family memories and proximity to friends. Age UK and MoneyHelper both recommend exploring downsizing first.

Can I borrow money from my family instead of equity release?

Yes — and it is often dramatically cheaper, but it must be set up properly. A formal loan or 'family equity release' arrangement should be drawn up by a solicitor as a deed of loan or, where the family member is taking a stake in the property, a deed of trust setting out beneficial ownership. Without paperwork, HMRC may treat repayments as gifts (with inheritance tax implications) and disputes are far more likely if a relationship sours. Family loans below £325,000 do not trigger gift tax during your lifetime, but the lender's estate may face IHT if they die within 7 years and the unrepaid loan was effectively a gift. Charge interest at HMRC's official rate (currently 4.0% from 6 April 2025) or zero to avoid tax surprises on the lender side.

Should I take my pension tax-free cash before considering equity release?

Usually yes. Anyone with a defined contribution pension can take up to 25% (capped at £268,275 under the Lump Sum Allowance) as a tax-free lump sum from age 55, rising to 57 on 6 April 2028. On a £100,000 pot that is £25,000 — money you already own, with no interest, no fees and no advice requirement beyond a free Pension Wise call. The only reason to leave it untouched is if you genuinely need the long-term invested growth (the £25k inside a balanced fund could compound at 5%+ a year), or if you have a defined benefit pension where taking tax-free cash reduces your guaranteed pension by a poor commutation factor.

How much does a council deferred payment scheme cost compared to equity release?

The local authority Deferred Payment Agreement (DPA) is a statutory scheme under the Care Act 2014 for people who need residential care and own their own home. The council pays your care home fees and the debt is repaid (with interest) when the home is sold. The interest rate is set by the Department of Health and Social Care and is published twice a year — for the period from 1 January 2026 to 30 June 2026 the maximum rate councils can charge is 4.05% (based on the 15-year gilt yield + 0.15%). That is dramatically cheaper than 6.95% equity release, and councils can charge only modest set-up fees. For care funding, a DPA almost always beats equity release.

What are the typical costs of downsizing in the UK?

Budget 5–7% of the new property's value. On a £250,000 retirement home: stamp duty £2,500 (3% on £125k–£250k tranche from April 2025 nil-rate-band changes), estate agent fees on the sale (1–1.5% + VAT of the old property price, so ~£3,000–£4,500 on a £300k sale), legal fees on both transactions (~£2,000–£3,500 total), removals (~£1,000–£3,000) and EPC, surveys and search fees (~£500–£1,000). On a £250k purchase, total is typically £8,000–£15,000. First-time buyer SDLT relief does not apply to downsizers — you have owned a property before. Compare this with a £60,000 equity release loan rolling up to £229,500 over 20 years.

Can I use a personal loan instead of equity release?

For smaller amounts under £25,000 a personal loan is often a better answer. Bank of England effective rate data for new £10,000 unsecured personal loans was around 8.4% in March 2026. The loan is fixed-rate, repaid in equal instalments over 1–7 years, and is unsecured — your home is not at risk. The downside is you need an affordable income to pass underwriting, and lenders cap unsecured borrowing at typically £25,000–£35,000. For a £15,000 conservatory or new boiler, a 5-year personal loan at 8.4% costs about £18,400 total — versus a £15,000 lifetime mortgage at 6.95% rolling up to about £57,000 if left for 20 years.

What does MoneyHelper say about equity release alternatives?

MoneyHelper — the government-backed guidance service run by the Money and Pensions Service — explicitly tells consumers to consider alternatives first. Its guide states: "Equity release isn't the only way you can use your home to boost your retirement income. Before you decide to commit, it's a good idea to explore the alternatives." The alternatives MoneyHelper highlights are downsizing, using other savings or assets first, applying for state benefits you may not be claiming, asking your local council about grants or interest-free loans for home repairs, and (for care costs) the Deferred Payment Agreement. The Equity Release Council's own consumer code requires advisers to discuss alternatives — but the depth varies, so it pays to read independent guidance from MoneyHelper, Age UK and Citizens Advice as well.

When does equity release actually make more sense than the alternatives?

Equity release wins on a narrow set of conditions: you do not want to move, you cannot afford monthly RIO interest payments on your retirement income, you have no significant pension savings to draw on first, the family loan route is not realistic, and you are not eligible for cheaper schemes like the council Deferred Payment Agreement. It can also be the right tool for a specific one-off purpose — funding a one-off care adaptation, helping a child onto the property ladder when downsizing would not free up enough, or as part of a deliberate inheritance-tax mitigation strategy. But this combination of conditions is rarer than the equity-release marketing suggests. Always take FCA-regulated advice from a member of the Equity Release Council and consider at least two of the alternatives in detail first.

Equity release alternatives: 7 cheaper ways to release cash

Which alternative fits your situation?

The right alternative depends on why you need the cash. Five common needs cover almost every equity release enquiry — and each has a cheaper answer than a lifetime mortgage.

Quick check

Why do you need the money?

1
Care fees for residential care, owner-occupier

→ Apply for the local authority Deferred Payment Agreement (Care Act 2014). The council pays the home; debt is repaid on sale of the property. Interest rate is capped — 4.05% for the period 1 Jan to 30 Jun 2026 (DHSC) — well below equity release.
2
I want a lump sum and have a defined contribution pension

→ Take your 25% tax-free pension lump sum first (up to £268,275 under the Lump Sum Allowance). It is your own money — no interest, no advice fees beyond a free Pension Wise session.
3
I want a lump sum and am happy to move

→ Downsize. On a £400k → £250k move, transaction costs are typically £12,000–£17,500 (5–7% of the buy). Net cash released ~£135,000. There is no ongoing interest.
4
I want to stay in the home and can afford monthly interest

→ Retirement interest-only (RIO) mortgage at ~5.65% (Moneyfacts, May 2026). Capital balance never rises, repaid on sale, death or move into care. Needs an affordability assessment.
5
Small amount (under £25,000) and I have a steady income

→ Unsecured personal loan at ~8.4% (Bank of England, March 2026). Fixed term, fixed payments, home not at risk. Far cheaper for short-term needs than a lifetime mortgage.

Family loans and shared family ownership are a sixth option that works alongside the above — paperwork from a solicitor is essential.

Equity release vs the four big alternatives — side by side

Illustrative comparison for borrowing £60,000 today. "Cost over 20 years" is what you (or your estate) end up paying on top of the £60k released. Downsizing's "cost" is the one-off transaction cost of moving — there is no ongoing borrowing.

Option	Cost over 20 yrs (on £60k)	Who pays interest	Impact on home	Complexity
Lifetime mortgage (equity release)	~£230,021 owed	Nobody monthly — rolls up against the house	You keep the title; debt eats your equity	Medium — FCA-regulated, ERC standards, mandatory advice
Downsizing	~£15,000 one-off (stamp duty + fees)	None — no borrowing involved	You move; equity stays in your pocket	Low/medium — conveyancing only; emotional cost can be high
Retirement interest-only (RIO)	~£67,800 in interest (paid monthly)	You, monthly, from income	Capital balance never rises; sold/repaid on death or care	Medium — needs affordability assessment
Family loan / shared family ownership	£0–£30,000 depending on agreed interest	Whatever you and your family agree	Family acquires a beneficial interest; needs a solicitor	High legally; low operationally
Pension tax-free cash / drawdown	Tax-free for the first 25%; income tax on the rest	None — your own money	Home untouched	Low if you already have a DC pension

Inline calculator: equity release roll-up vs downsizing

Put in the cash you need, the value of your current home and the rate you have been quoted. The calculator rolls up the equity release balance to year 20 and compares it with the one-off cost of moving to a home worth 60% of your current one (a realistic four-bed → two-bed step-down).

Cost calculator

Equity release roll-up vs downsizing transaction cost

Cash you need now

Current home value

Equity release rate (%)

Equity Release Council Q1 2026 average is 6.95%.

Years until repayment

Average life of an equity release loan is 14–17 years (ERC data).

Equity release option

£230,021

owed after 20 years on £60,000 borrowed at 6.95% — that's £170,021 in interest.

Downsizing option

£145,600

net cash from selling at £400,000 and buying at £240,000 — transaction cost £14,400.

Result

Downsizing is roughly £155,621 cheaper than equity release over 20 years on these inputs. You release £145,600 immediately by moving, versus paying £170,021 in rolled-up interest on a £60,000 lifetime mortgage.

Illustrative. Equity release roll-up uses annual compounding at the rate you set. Downsizing assumes you buy a property worth 60% of your current one and pay 6% of the new property value in stamp duty, agent, legal and removal costs. Real-world transaction costs vary — SDLT in particular depends on the new property price. Always get a proper quote from an FCA-regulated equity release adviser (a member of the Equity Release Council) before deciding.

Three real scenarios

Scenario

Margaret, 72

Widow, £450k three-bed home, £8k savings, £14k income

Situation: Needs £40k to refit a tired kitchen and bathroom. A friend used equity release and recommended it. The local broker has quoted a lifetime mortgage at 6.85%.

Margaret has no defined contribution pension and does not want to move — the house is full of memories of her late husband. The broker's lifetime mortgage at 6.85% would roll up the £40,000 to roughly £152,000 owed by age 92.

Better option 1 — RIO mortgage. At Moneyfacts' best-buy RIO rate of 5.65% on a 5-year fix, Margaret would pay around £188/month in interest (£40,000 × 5.65% ÷ 12) on income she largely has. The £40,000 capital balance never grows. She still owns the house outright; her estate owes £40,000 instead of £152,000.
Better option 2 — partial works funded by a council Disabled Facilities Grant. If any of the works are mobility-related (walk-in shower, downstairs WC, ramp), her council may fund up to £30,000 of them under the Care and Support for Disabled Facilities Grant rules. Worth a phone call before borrowing.
Worst case if she still wants equity release. Insist on a drawdown lifetime mortgage rather than a single lump sum. Interest only rolls up on what she actually draws — and a £15,000 starter tranche costs far less to roll up than £40,000.

Scenario

John & Susan, 68 and 66

£520k four-bed, both retired, joint pension income £36k

Situation: Want £80k to help their adult son with a house deposit. Have been quoted equity release at 6.95%.

Both have qualifying defined contribution pots they have not yet touched. John has £140,000, Susan has £95,000. The 25% tax-free PCLS from each pot alone is £35,000 + £23,750 = £58,750, with no interest, no fees and no rolling up.

The clean answer. Take £58,750 of tax-free pension cash plus a small £21k bridge from joint savings — total £80k to their son with zero debt against the house.
Alternative — downsize in five years anyway. They have already discussed moving to a £325k two-bed bungalow in the same town when John's knees worsen. Bringing that forward to fund the gift releases ~£175k after costs — enough to gift their son and leave a £95k cushion for themselves.
What equity release would have cost. £80,000 at 6.95% rolling up over 20 years = ~£305,500 owed when the house is sold. Their son could buy and inherit half a house for the cost of helping with the deposit the equity-release way.

Scenario

Patricia, 81

Owner-occupier, just moved to a residential care home (£62k/yr fees)

Situation: The council is paying initially. She owns her £310k bungalow. The care home is asking how she will fund the next 18 months. Equity release was suggested.

This is the single clearest case where equity release should not be the answer. Patricia qualifies for the local authority's Deferred Payment Agreement under the Care Act 2014.

How the DPA works. The council continues to pay the care fees and adds them to a debt secured against the bungalow. Interest accrues at a maximum statutory rate — for 1 January to 30 June 2026 the cap is 4.05% (DHSC; based on the 15-year gilt yield plus 0.15%). The debt is repaid when the bungalow is eventually sold (usually on death).
How much cheaper. 18 months of £62k care = £93,000. Equity release at 6.95% adds £6,460 of interest in year 1 (and rising). The DPA at 4.05% adds £3,766 — and there are no broker fees, no compulsory advice fees and no early repayment charges.
The downside. Not every council offers DPAs as smoothly as the statutory framework intends; check your council's Charging for Residential Accommodation Guidance (or the post-2014 equivalent) and escalate if they refuse without good reason. Age UK's helpline is a useful first call.

The 7 alternatives in detail

1. Downsizing

The mechanic. Sell your current home, buy a smaller or cheaper one, keep the difference. The cash released is the gap between the two property prices minus your moving costs — typically 5–7% of the new property's value. On a £400,000 → £250,000 move, that is about £135,000 in your pocket within 3–4 months of starting.

When it fits. You are open to a smaller home, a less expensive area, or downsizing the garden and bedrooms you no longer need. You want a lump sum without taking on debt. Your equity is largely tied up in the house. You are willing to live with the emotional cost of leaving a long-time home.

When it does not. The whole street is family and you are unwilling to move more than a mile; smaller homes locally cost almost as much as yours; you have just had expensive bespoke adaptations done and can't replicate them in a new property.

Watch out: First-time-buyer Stamp Duty Land Tax relief does not apply to you as a downsizer — you have owned property before. Use the GOV.UK SDLT calculator for your new property price.

2. Retirement interest-only (RIO) mortgage

The mechanic. A regulated residential mortgage where you pay only the interest each month — the capital balance never reduces, and is only repaid when you sell, die or move into long-term care. Best-buy RIO rates on Moneyfacts in May 2026 are around 5.45–5.85% on 5-year fixes (Leeds Building Society, LiveMore Capital, Penrith Building Society and others).

When it fits. You have reliable retirement income that comfortably covers a monthly interest payment. You want to stay in the home. You hate the idea of a rolled-up debt eating your estate. You want certainty over the maximum exposure.

When it does not. Your income is too tight to pass an affordability assessment; you have no plans for your estate so the rolled-up nature of equity release is genuinely irrelevant; you would rather have no monthly outgoings.

See: Lifetime mortgage vs RIO — the full comparison.

3. Family loan or shared family ownership

The mechanic. A relative lends you money against the house, or buys a stake in the house. Repayment terms — interest rate, repayment trigger, treatment on death — are set out in a deed drawn up by a solicitor. Done properly, this can be the cheapest answer of all because the lender (usually an adult child) is also a beneficiary of the estate.

When it fits. Family has the cash and is willing. The relationship is solid enough to handle a financial agreement. You are comfortable being financially indebted to your children or siblings.

When it does not. Sibling rivalry is real and a loan from one child not the others creates resentment; the lender's marriage or business is unstable; there is no paperwork and "we'll sort it later" is the plan.

Legal must-haves: (a) a written deed of loan or deed of trust; (b) a clear repayment trigger (usually sale of the property or death); (c) an agreed interest rate — zero or HMRC's official rate (4.0% from 6 April 2025) keeps the tax position simple; (d) registration as a restriction on the property's title at HM Land Registry if the family stake is meaningful.

4. Pension tax-free cash or drawdown

The mechanic. Take some or all of your 25% pension commencement lump sum (PCLS) from a defined contribution pension, from age 55 (rising to 57 from 6 April 2028 under HMRC rules). On a £100,000 pot that is £25,000 tax-free, capped across all your pensions at the £268,275 Lump Sum Allowance.

When it fits. Almost always — if you have the pot. This is your own money. There is no interest, no fees beyond a free Pension Wise session, no advice required by regulation.

When it does not. You have a defined benefit (final salary) pension where taking PCLS reduces the guaranteed pension at a poor commutation factor; you genuinely need the long-term invested growth more than the cash; you want to leave the pension pot intact for inheritance (under current rules, DC pensions pass tax-free on death before 75 — though this regime is set to change from April 2027).

See: £100k pension pot — full guide.

5. Unsecured personal loan

The mechanic. A standard bank loan, fixed rate, fixed monthly payment over 1–7 years. The Bank of England's effective rate on new £10,000 personal loans was around 8.4% in March 2026. The home is not security and is not at risk if you default — you would face a CCJ on your credit file, but no eviction.

When it fits. Smaller amounts (£5,000–£25,000), specific purposes (new boiler, kitchen refit, car), short term, you have income to make the monthly payments.

When it does not. Larger sums; you have already retired and your income is state-pension-only (most lenders will decline); you want to stretch the loan over the rest of your life.

6. Using savings, ISAs and investments

The mechanic. Spend money you already have. Cash ISAs and savings accounts are obvious; Stocks & Shares ISAs can be drawn down too, though you may want to do it gradually to avoid selling into a market dip.

When it fits. You have savings of comparable size to the amount needed; the savings are earning less than your equity release quote (almost always true at 6.95% versus 4% easy-access); you have other liquid assets to keep an emergency buffer.

When it does not. Spending your buffer leaves nothing for unexpected costs; your investments are inside a wrapper (pension, ISA) where withdrawing now triggers permanent loss of tax-free growth.

7. Local authority deferred payment scheme (care funding)

The mechanic. Statutory scheme under the Care Act 2014 in England (similar schemes exist in Scotland, Wales and Northern Ireland under different names). The council pays your residential care fees; the debt is secured against your home and repaid when the property is eventually sold. Interest is capped at the rate set twice a year by DHSC — currently 4.05% for 1 January to 30 June 2026 (15-year gilt yield + 0.15%).

When it fits. You own your home, you need residential care, and selling the house immediately is undesirable (a spouse still lives there, or the housing market is bad).

When it does not. You are receiving care at home rather than in residential care (DPA is residential-only); you have already sold or transferred the property; the council has assessed your other capital as above the £23,250 means-test threshold in a way that excludes you (rare but possible). See equity release for care fees for the broader comparison.

Council Deferred Payment Agreement — the under-used answer for care fees

If the need is residential care, the local authority Deferred Payment Agreement is almost always cheaper than equity release. The Department of Health and Social Care sets a maximum interest rate twice a year — for the period 1 January to 30 June 2026 it is 4.05% (15-year gilt yield + 0.15% as required by the Care and Support (Deferred Payment) Regulations 2014). Your council must offer the scheme if you meet the criteria (over the upper capital limit of £23,250 excluding the home; needing residential care; the home is not occupied by an exempt person). Set-up costs are modest. There is no compulsory advice fee and no early repayment charge. Compared with a 6.95% lifetime mortgage with broker, valuation and adviser fees, the DPA can save tens of thousands of pounds over a typical 2–5 year care stay.

The summary: when to use what

The alternatives, ranked roughly by cheapness

Pension tax-free cash. Cheapest because it is your own money. No interest, no fees, no debt.
Savings and ISAs. Same logic — your own money, no interest cost.
Council Deferred Payment Agreement (care fees only). 4.05% statutory cap (H1 2026); designed by Parliament to be cheaper than commercial alternatives.
Family loan or shared family ownership. 0–4% typically; the lender is usually a beneficiary anyway.
Downsizing. Zero ongoing interest; one-off 5–7% transaction cost on the new property.
Retirement interest-only mortgage. ~5.65% but you pay it monthly so the capital balance never grows.
Unsecured personal loan. ~8.4% but home is not at risk and the term is short.
Equity release (lifetime mortgage). ~6.95% with no monthly payments — cheapest-feeling, often the most expensive in total.

The right answer is almost always a combination of one or two of the above before any equity release decision. The Equity Release Council's own consumer code requires advisers to discuss alternatives — make them prove they have.

What MoneyHelper says

MoneyHelper, the government-backed guidance service run by the Money and Pensions Service, publishes a dedicated page on alternatives to equity release. Its opening paragraph is worth quoting in full.

MoneyHelper — Alternatives to equity release

"Equity release isn't the only way you can use your home to boost your retirement income. Before you decide to commit, it's a good idea to explore the alternatives."

MoneyHelper highlights downsizing, drawing on savings and other assets first, claiming state benefits you may be entitled to, asking your local council about grants and interest-free loans for home repairs, and (for residential care) the Deferred Payment Agreement. Source: MoneyHelper — Alternatives to equity release.

Frequently asked questions

What's the cheapest alternative to equity release?: For most people the cheapest option is using existing pension or savings before borrowing against the home. The 25% tax-free pension lump sum on a £100k pot is £25,000 you can take from age 55 (57 from April 2028) with no interest, no fees and no debt. If a pension is not available, downsizing usually beats equity release because a one-off transaction cost of 5–7% of the new property value is far less than a 6.95% interest rate rolling up for 15–20 years. Equity Release Council Q1 2026 data shows the average new-business rate is 6.95% — at that rate, a £60,000 lifetime mortgage doubles to roughly £120,000 owed in around 10 years.
How does a retirement interest-only (RIO) mortgage compare to equity release?: A RIO is the same idea as equity release in that the loan is repaid when you sell the home, die or go into long-term care — but you pay the interest each month, so the capital balance never grows. Best-buy RIO rates on Moneyfacts in May 2026 are around 5.45–5.85% on 5-year fixes, versus 6.95% (Equity Release Council Q1 2026 weighted average) for a lifetime mortgage. Over 20 years, paying interest monthly on a £60,000 RIO at 5.65% costs around £67,800 in interest — your estate still owes £60,000. Letting the same £60,000 roll up on a lifetime mortgage at 6.95% leaves your estate owing about £229,500. The catch with RIO: you must pass an affordability assessment showing you can sustain monthly payments for life on retirement income.
Is downsizing better than equity release?: Financially, almost always yes. Selling a £400,000 home and buying a £250,000 retirement home releases £150,000 minus stamp duty, agent, legal and removal costs — typically 5–7% of the new property's value. Net cash released is roughly £135,000 with no ongoing interest cost. The same £135,000 borrowed via a lifetime mortgage at 6.95% rolls up to about £515,000 owed over 20 years. Downsizing's real costs are non-financial: leaving a neighbourhood, family memories and proximity to friends. Age UK and MoneyHelper both recommend exploring downsizing first.
Can I borrow money from my family instead of equity release?: Yes — and it is often dramatically cheaper, but it must be set up properly. A formal loan or 'family equity release' arrangement should be drawn up by a solicitor as a deed of loan or, where the family member is taking a stake in the property, a deed of trust setting out beneficial ownership. Without paperwork, HMRC may treat repayments as gifts (with inheritance tax implications) and disputes are far more likely if a relationship sours. Family loans below £325,000 do not trigger gift tax during your lifetime, but the lender's estate may face IHT if they die within 7 years and the unrepaid loan was effectively a gift. Charge interest at HMRC's official rate (currently 4.0% from 6 April 2025) or zero to avoid tax surprises on the lender side.
Should I take my pension tax-free cash before considering equity release?: Usually yes. Anyone with a defined contribution pension can take up to 25% (capped at £268,275 under the Lump Sum Allowance) as a tax-free lump sum from age 55, rising to 57 on 6 April 2028. On a £100,000 pot that is £25,000 — money you already own, with no interest, no fees and no advice requirement beyond a free Pension Wise call. The only reason to leave it untouched is if you genuinely need the long-term invested growth (the £25k inside a balanced fund could compound at 5%+ a year), or if you have a defined benefit pension where taking tax-free cash reduces your guaranteed pension by a poor commutation factor.
How much does a council deferred payment scheme cost compared to equity release?: The local authority Deferred Payment Agreement (DPA) is a statutory scheme under the Care Act 2014 for people who need residential care and own their own home. The council pays your care home fees and the debt is repaid (with interest) when the home is sold. The interest rate is set by the Department of Health and Social Care and is published twice a year — for the period from 1 January 2026 to 30 June 2026 the maximum rate councils can charge is 4.05% (based on the 15-year gilt yield + 0.15%). That is dramatically cheaper than 6.95% equity release, and councils can charge only modest set-up fees. For care funding, a DPA almost always beats equity release.
What are the typical costs of downsizing in the UK?: Budget 5–7% of the new property's value. On a £250,000 retirement home: stamp duty £2,500 (3% on £125k–£250k tranche from April 2025 nil-rate-band changes), estate agent fees on the sale (1–1.5% + VAT of the old property price, so ~£3,000–£4,500 on a £300k sale), legal fees on both transactions (~£2,000–£3,500 total), removals (~£1,000–£3,000) and EPC, surveys and search fees (~£500–£1,000). On a £250k purchase, total is typically £8,000–£15,000. First-time buyer SDLT relief does not apply to downsizers — you have owned a property before. Compare this with a £60,000 equity release loan rolling up to £229,500 over 20 years.
Can I use a personal loan instead of equity release?: For smaller amounts under £25,000 a personal loan is often a better answer. Bank of England effective rate data for new £10,000 unsecured personal loans was around 8.4% in March 2026. The loan is fixed-rate, repaid in equal instalments over 1–7 years, and is unsecured — your home is not at risk. The downside is you need an affordable income to pass underwriting, and lenders cap unsecured borrowing at typically £25,000–£35,000. For a £15,000 conservatory or new boiler, a 5-year personal loan at 8.4% costs about £18,400 total — versus a £15,000 lifetime mortgage at 6.95% rolling up to about £57,000 if left for 20 years.
What does MoneyHelper say about equity release alternatives?: MoneyHelper — the government-backed guidance service run by the Money and Pensions Service — explicitly tells consumers to consider alternatives first. Its guide states: "Equity release isn't the only way you can use your home to boost your retirement income. Before you decide to commit, it's a good idea to explore the alternatives." The alternatives MoneyHelper highlights are downsizing, using other savings or assets first, applying for state benefits you may not be claiming, asking your local council about grants or interest-free loans for home repairs, and (for care costs) the Deferred Payment Agreement. The Equity Release Council's own consumer code requires advisers to discuss alternatives — but the depth varies, so it pays to read independent guidance from MoneyHelper, Age UK and Citizens Advice as well.
When does equity release actually make more sense than the alternatives?: Equity release wins on a narrow set of conditions: you do not want to move, you cannot afford monthly RIO interest payments on your retirement income, you have no significant pension savings to draw on first, the family loan route is not realistic, and you are not eligible for cheaper schemes like the council Deferred Payment Agreement. It can also be the right tool for a specific one-off purpose — funding a one-off care adaptation, helping a child onto the property ladder when downsizing would not free up enough, or as part of a deliberate inheritance-tax mitigation strategy. But this combination of conditions is rarer than the equity-release marketing suggests. Always take FCA-regulated advice from a member of the Equity Release Council and consider at least two of the alternatives in detail first.

Sources

Equity Release Council — Quarterly market reports (Q1 2026). Source of the 6.95% weighted average rate for new lifetime mortgages in Q1 2026, and of the typical loan life of 14–17 years used to bound the "20-year" comparison.
MoneyfactsCompare — Retirement interest-only mortgages. Source of the 5.45–5.85% best-buy 5-year RIO fix range used as the "~5.65%" midpoint in May 2026.
Bank of England — Effective interest rates of UK monetary financial institutions. Source of the ~8.4% effective rate on new £10,000 personal loans (March 2026 release).
MoneyHelper — Alternatives to equity release. Verbatim quote and list of recommended alternatives in the "What MoneyHelper says" section.
Age UK — Equity release. Consumer guidance recommending alternatives are explored first, especially downsizing and benefits claims.
DHSC — Care and Support Statutory Guidance (Care Act 2014). Statutory basis for the local authority Deferred Payment Agreement scheme in England, including the 15-year gilt yield + 0.15% interest rate formula.
UK SI 2014/2672 — Care and Support (Deferred Payments) Regulations 2014. Source of the 4.05% maximum interest rate for the period 1 January to 30 June 2026 used in the care-funding comparison.
GOV.UK — Stamp Duty Land Tax rates. Reference for the SDLT figures used in the downsizing transaction cost estimates. First-time buyer relief does not apply to downsizers.
MoneyHelper — Tax-free pension lump sum allowances. Source of the £268,275 Lump Sum Allowance (LSA) used in the pension PCLS sections.
HMRC — Interest rates for late and early payments. Reference for HMRC's "official rate" of 4.0% (from 6 April 2025) used as a safe benchmark for interest on family loans.
FCA — Regulated mortgage contracts. Reference for the regulatory regime around lifetime mortgages and RIO mortgages. Equity release advice in the UK is a regulated activity; any adviser must be authorised by the FCA.