If, because of your age or financial situation, you can’t find a mortgage lender willing to take you on, consider getting a relative or friend to guarantee your loan.

(For more about this, read Guarantor mortgages)

If this isn’t a possibility, don’t despair you still have options. 

Begin by asking yourself if you really need the cash. If the answer is yes, and you are already a home owner, you could

• Downsize to a cheaper property to free up some equity,

• Take out a low-cost loan, or

• Look into equity release plans.

 

The Pros and Cons Of Downsizing 

You get the cash you need without going into debt, but you have to give up your current home.

 

The Pros and Cons of a Loan

You get the cash without having to move house, but you have to repay what youve borrowed.

And, because of your age and/or financial situation, to get a lender to take you on, you may have to secure the debt against your home which means you could lose it if you don’t keep up the repayments.

The interest rate is likely to be higher than for a mortgage and the term will probably be quite a bit shorter, so the monthly payments will be more.

Of course, this does mean that, in the long run, your debt will cost you less as the following example shows.

Borrowing £20,000 using a repayment mortgage over 15 years at an interest rate of 6.5 per cent would cost £174 a month, or £31,360 in total.

Borrowing the same amount using a personal loan over 10 years at an interest rate of 8 per cent would cost £243 a month, but only £29,118 in total.

 

The Pros and Cons of Equity Release

Again, you get the cash without having to move house, but your estate must repay what youve borrowed plus any interest due after you die.

This is likely to require the sale of your house, so it can’t be passed on to your heirs.

And because equity release plans are far from cheap, this could eat up the bulk of their inheritance.

In general, these plans are complex and poor value, and they should be treated as a very last resort.

If you still want to know more about them, read Equity release plans explained.

 

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