DIY options

If an equity release product isn't for you, then there are several ways in which you can release value from an asset without using a commercial equity release product. In this section, we'll explore a few of these 'DIY' options. You might choose to:

• Rent part of your home
• Subdivide your property
• Trade down
• Sell your home to family or whanau

Rent part of your home

You can release value from your home by renting out the space you don't need. If your home has rooms that could easily be let, your financial flexibility is increased without your having to start thinking about selling the house until you're ready. It also means you have the company of someone else in your home, which may be an advantage.

Of course, there can be downsides to taking in a boarder or tenant (loss of privacy, for example) so it's better if the rented part of the house has its own facilities. Having separate facilities also mean you're likely to be able to charge more rent, as tenants like their privacy, too.

If having help and company around are more important to you than money, you might consider a 'home-share' arrangement where you provide accommodation to someone in exchange for housework and company. But remember, put any arrangements you make in writing so that both parties know where they stand. What are you offering, and what do you expect in return?

Factors to consider

There are reasons for and against renting part of your home for equity release:

For:

• You get a regular income with few commitments.
• You get to stay in your own home.
• Any improvements you make to prepare the rented area may add to home's value.
• You'll have company and possibly extra security from having someone else on the property.
• Your income should rise with general rents.
• You can stop the arrangements if the situation becomes uncomfortable.

Against:

• There might be initial setup costs for independent facilities.
• The potential for loss of privacy.
• Income is taxable
• The amount you receive could reduce government income-tested benefits - see Impact on government benefits.

Subdivide your property

You might be able to sell part of your property by subdividing it. Subdividing lets you keep your home, while reducing the size of your section and the amount of maintenance you need to do as you get older. Again, if your home has the necessary planning consents (or the potential to obtain consents), this will increase your financial flexibility in retirement. Even if you choose not to subdivide the property after all, you'll probably increase its potential sale value by getting all the necessary consents.

Factors to consider

There are reasons for and against subdividing your section for equity release:

For:

• You will receive a lump sum immediately following the sale.
• The amount of ground maintenance you need to carry out is reduced.
• You're able to stay in your own home.

Against:

• Having two houses on a single section can mean less privacy.
• The upfront surveying and subdivision costs are quite expensive.
• You may need to get planning permission.
• Capital gains within 10 years of purchase may be taxable.

Trade down

Selling the family home and moving to something smaller and cheaper will release part of the equity in your home. This might also include moving to a retirement village. Our retirement villages section contains full information about finding the right village, along with checklists and tips to help make your search easier.

Factors to consider

There are reasons for and against trading down your home for equity release:

For:

• Doing so should release capital. You should have a clear idea of how much cash you need - that way, you won't be tempted to spend more than you should on your new home.
• You can buy a house that is more suitable for your future needs and priorities.
• "Smaller" can also mean "newer" - and that can mean fewer maintenance worries.

Against:

• Leaving your neighbourhood could mean leaving friends and support networks.
• The expenses involved with selling your house, buying a new one and moving in might take up to 5% of the value of your home.
• You may find it difficult to find what you want at the price you can afford, while also releasing funds.
• House moving is a major and sometimes stressful project.

If trading down means moving to a new town, think about renting a place there short-term so that you can see what living there might be like. Some places, particularly coastal towns, can be cold and empty during the winter, so try and spend the winter there if you can. Make sure you try before you buy!

Sell your home to family or whanau

You could also look at selling your home to family or whanau. If you intend to leave your home to them anyway, they might be willing to provide you with financial assistance during retirement in the knowledge that, when you die, they will inherit the house. Don't forget to get legal advice about formalising any arrangements you make - this protects everyone. Also remember to make sure the arrangement is taken into account in your will.

Factors to consider

There are reasons for and against selling your home to family for equity release:

For:

• Standard selling costs (such as agents' fees) can be reduced.
• Capital can be released immediately.
• Part of the purchase price can be left in as a mortgage, and interest can be charged to provide additional income.
• You're free to remain in your home.

Against:

• It's not for everyone - family politics can sometimes make this an awkward choice.
• Proper legal advice is needed for everyone involved, which means associated legal fees.
• Your occupancy rights have to be clearly established.
• Your will may also need to be changed to reflect the new ownership and future expectations.