When you reach retirement planing age, it’s time to take stock of your finances and decide how you want to live for the remainder of your life. For some, who maybe have struggled to build up a large pension fund, your options may be limited.
Can I Use the Equity Release Money for a 2nd Home?
If you are eligible for Equity release, you are able to use the released funds to purchase a second home. However, if you borrow another mortgage, you may end up having the home repossessed if it isn’t paid off when you die.
Over-55s can take an equity release loan to help buy a second property. It’s important to balance your finances to ensure you don’t end up leaving behind large amounts of debt.
But for others you may be able to consider ways to either supplement your income, or live life to the fullest.
A second home can either be a useful income source, or a destination for regular holidays.
Read our guide to find out how equity release can help you achieve your financial goals in retirement.
- – Equity Release while being on state benefits
- – Equity Release schemes and your pension
- – Equity Release interest rates
- – Equity Release Solicitors costs
We update all our guides regularly. If you are researching Equity Release and we haven’t got an exact guide that helps you, keep coming back as we update daily.
Equity Release: Buying a Second Home
If you own your home, you’ll have built up equity in the property even if you haven’t fully paid off your mortgage. When you reach 55 years old, you’ve the option of taking an equity release loan which will give you a cash lump sum (or regular payments if you prefer) that you’ll only repay from your estate once you’ve passed away or gone into full-time care.
So if you have paid off your home, and want to keep it, but you also want a second home, equity release could be a way of raising funds to make that purchase viable.
The downside is that it will have an impact on the inheritance you leave behind, as it will be repaid from the sale of your property, but it’s your decision to take.
According to the Equity Release Council 37,000+ people used Equity Release schemes in 2018, releasing over £3.06bn from their properties.
Equity Release: Second Home as a Holiday Destination
You could use this second home as a holiday destination – after all, if you’ve worked hard in life, you may feel like you want somewhere you can escape to on a regular basis. Or instead, you could purchase a new property using equity to provide another source of regular income, if you’re interested in entering either the rental or property development markets.
Either way, a lump sum through equity release can help you afford a second home when you’re of an age that second mortgages might not be as flexible as they were when you were younger.
Equity Release Interest Rates
Equity release rates vary depending on your personal circumstances, the value of your home, your age and health, but they’re the lowest they’ve been in many years, sometimes as low as almost 2.5%, with an average around 4.5%. We have a specific article about Equity Release Interest rates
That being said, it’s still important you seek professional financial advice before using equity release to buy a second home, especially if you’ll still have to take a mortgage out on that property.
Equity release won’t grant you the full value of your current home – at best, it’ll be around 60% – so you’ll need to find a way to make the remaining payments on your second home.
You will at least be protected by a ‘no negative equity’ guarantee, providing you take equity release through a reliable lender. This ensures your equity release repayment due will never exceed the value of your home.
Quick Equity Release FAQs
Home reversion plans are, in essence, a means of selling a share in your property to an investor, in exchange for payment. There are no repayments, with the investor receiving their share of proceeds when the property is eventually sold.
The Equity Release Council is the industry body which represents equity release providers, qualified financial advisers, solicitors and intermediaries. Equity release is a growing sector, especially for older homeowners who may have limited access to finance.
You need to be at least 55 years old to apply for equity release in the UK. If you are planning to make a joint application, this applies to both of you.
Equity release drawdown works by giving you the value of your loan as a pot that you can make withdrawals from. You’ll only pay interest on the money you decide to withdraw.
How Can Money Savings Advice Help You With Releasing Equity?
Here at Money Savings Advice, we have partnered with some of the UK’s leading Equity Release brokers. They have already helped thousands of people get the best Equity Release deal and they can do the same for you.
Choosing an independent adviser means they won’t recommend a scheme unless they are sure it is in your best interests. Their advice is also regulated by the FCA, which gives you an additional layer of protection.
If you would like to speak to one of these brokers who can provide you with a ‘whole market quote’ then click on the below and answer the very simple questions.