Did you know that you can use equity release to purchase a second home? Many people are unaware that older home owners can buy another property with a Lifetime Mortgage. Whether you are looking for a holiday home, an investment property or a buy-to-let – equity release is one of the options available.
How can I release equity to purchase a second home?
To be eligible for equity release, you must be a home owner aged 55 or over. You must also seek professional advice from an equity release adviser. Your adviser will help you to find out if releasing equity is suitable for you. If it is, you can proceed if you wish. Your adviser will then explain all of the options available to you as well as the benefits and risks.
What options are available?
There are two types of equity release available. Lifetime Mortgages and Home Reversion Plans.
By far the most popular type of equity release is a lifetime mortgage, which is like a normal mortgage but it lasts for the rest of your life. There are different options available in terms of the interest you pay. You can choose roll-up, whereby the interest builds up on the lump sum you’ve borrowed over time. You are also products that can allow you to pay the interest. A Lifetime Mortgage is repaid when you die, or if you move into long-term care. You can withdraw a lump sum or opt for a draw down facility which allows you to take money out in instalments.
A home reversion plan differs from a lifetime mortgage because you sell all or part of your home in exchange for the cash you release. You can stay in your home for the rest of your life, or until you move into long term care.
You must always seek professional advice if you are considering equity release, as it may affect your entitlement to state benefits and will reduce the value of your estate. You may need to consult with additional experts on Wills and Estate Planning (not regulated by the FCA) and tax specialists.
Where can I find an equity release adviser?
We would only recommend using a provider that is a member of the Equity Release Council, such as Access Equity Release.
Equity release is regulated by the Financial Conduct Authority to ensure that equity release borrowers are fully informed and that they receive quality advice to best suit their individual circumstances.
The Equity Release Council provides an extra layer of confidence thanks to their high standards of excellence. Members, like Access Equity Release, must guarantee you will never owe more than the value of your home and that you can stay in your home for life. This is the “No Negative Equity Guarantee.”
Do I need an income to qualify for equity release?
No you do not need an income to qualify for equity release. You do need to be a homeowner and most lenders require that your property is of a minimum value to be considered – for example no lower than £70,000.
What If I have unsecured debts?
This is something that your equity release adviser will look at thoroughly to work out if equity release is suitable for you. However from a lender perspective, it is possible to release equity if you have unsecured debts.
Can I buy a second property abroad?
Yes. You can remortgage or release equity from your current home to pay for a second home overseas. You will need expert advice from an equity release specialist and you should also get independent advice on taxes and regulations in the country you’re buying in. Make sure you are fully informed about any additional charges you might have to pay.
You will need to factor in currency exchange rates too.
What If I want to use the money to help my children buy a home?
This is a very common reason to release equity from your own home. Your adviser will discuss the options with you and may advise you to seek independent advice on inheritance tax and wills and estate planning.
Curious to know how much equity you could release?
Use our equity release calculator for an estimate.
Access Equity Release is a trading name of Your Mortgage Decisions, which is authorised and regulated by the Financial Conduct Authority (FCA), FRN 459763.
