Can I Use Equity Release to Buy Another House

Can I Use Equity Release to Buy Another House

Can I Use Equity Release to Buy Another House

In the short of it, yes, yes you can. If you’re over 55 and looking to buy a second property, perhaps a holiday home in the countryside, then equity release could be for you.

Taking equity out of your current home is tax-free money, for a start, and you’re more likely to get a higher value of cash compared to what you could get on a personal loan. Your best bet is to speak to a financial advisor to go through your current financial circumstances, to see what you can take out of your current property and assess what you can afford.

Taking equity out of your current property also means you don’t have to make any repayments until the house is sold, you go into care or you pass away. This also doesn’t affect your retirement income, so you can live your later years relatively stress-free and with more financial freedom.

When it comes to equity release, you generally have two options, to apply for a lifetime mortgage or a home reversion plan.

A lifetime mortgage is when you take the equity out of your home in a lump sum or smaller amounts, further down the line. You can even earmark some of the value of the property as an inheritance for your family.

Interest is added to what you have borrowed and can either be repaid as you go along or added up as a total sum at the end.
After you have passed away or the house is sold, this money will then be used to pay off the remaining loan.

Anything left will go to your beneficiaries and if your estate can pay off the loan without having to sell then this is an option. If there is not enough, then your beneficiaries will have to repay the extra from the estate. This can be guarded against as lifetime mortgages offer a no- negative equity guarantee. This means the beneficiaries will never have to pay back more than the value of the home.

The other option is a home reversion plan. This is when you sell part or all of your property to a reversion provider, but you still own it. You are still able to live in the property as long as you keep up on the maintenance side of things. In return, you can receive a lump sum of cash or several smaller payments, that could be classified as an income for your later years.

No repayments need to be made until you pass away, go into care or the property is sold.

With home reversion, you get between 30%- 60% of the value of your home, so you may run the risk of getting below market value if you are wanting to purchase another property. If you are wanting to move, your property needs to be accepted by the Equity Release Council standard, to ensure continuing equity is maintained.

As previously stated, before considering equity release it is always wise to speak to a financial advisor about your options and what is the right move for you.

Your home/property may be repossessed if you do not keep up repayments on your mortgage.

Some buy to let mortgages are not regulated by the Financial Conduct Authority.

You will need to take legal advice before releasing equity from your home as Lifetime Mortgages and Home Reversion plans are not right for everyone.  This is a referral service.