Buying a second or holiday home using equity release
These plans are temporarily unavailable - the details below provide guidance in the meantime.
Owning a second property is something many of us aspire to. Whether it means having somewhere to escape to in the cold winter months or a home closer to family, having a second property offers new experiences and opportunities.
As equity release can be used for any purpose, there’s no reason why you couldn’t use your money to buy a second or holiday home, either in the UK or abroad.
If you are thinking of doing this, bear in mind that you will probably need to buy the second property outright as it is difficult for older people to secure additional mortgages.
You should also bear in mind the costs associated with buying a second home. In the UK, stamp duty can be a significant expense, depending upon the value of your second home.
Whether you buy in the UK or abroad, you will have solicitors’ fees to pay. What’s more, if you are thinking of buying abroad you should consider currency exchange rates and local laws and regulations.
Releasing equity on a second home?
While equity release schemes primarily lend on your main residence, there are several lenders that allow you to release equity on a qualifying second/holiday home.
Whether you’re considering a drawdown plan, voluntary payment scheme or an interest-only lifetime mortgage, we have a range of options on a second or holiday home basis.
What is the definition of a second property or holiday home?
One equity release lender, Canada Life, defines a second home as a property that must be available for the sole occupancy of the owner, or allowed to be let-out for a maximum of 4 weeks consecutively.
The property must also be used by the homeowner for a minimum of 4 weeks every year and have no formal agreements or assured shorthold tenancy agreement in place (i.e. you are not letting the property out).
A holiday home shouldn’t be advertised as such and must not have any prominent signage indicating any lettings status.
Do I qualify for a second home equity release scheme?
One prerequisite for releasing equity is that you are between the ages of 55 and 95. This applies to the youngest property owner, should you have joint ownership.
It’s worth noting that your main residence must not be near your second home, otherwise the equity release provider could decline any lifetime mortgage application.
Qualifying property values start at £70,000 and can go up to a maximum of £6 million. The property must be situated in either England, Scotland or Wales.
The amount you can borrow is based on the lender’s standard terms for loan-to-value (LTV) criteria. This traditionally would start from 14 per cent at age 55, rising to 45 per cent between ages 90-95.
Don’t worry, this isn’t as complicated as it sounds. Get in touch with one of our advisers today and they will be happy to tell you whether you qualify for a second home equity release scheme.
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Key features of second home plans
Our holiday and second home lifetime mortgages come with a range of flexible features.
One of the most popular is a drawdown facility, where lump sums can be taken in stages – giving you more flexibility. We also have repayment options, whereby the future balance can either be allowed to roll-up or controlled by way of contributions; be it voluntary repayments or interest-only.
If you are considering repaying your plan at some point in the future, both schemes have the benefit of fixed early repayment charges of either 8 or 10 years maximum, depending on the lender, with no repayment penalty thereafter.
Buy-to-let equity release schemes
If you are renting out your second home, we now have a dedicated buy-to-let equity release page that outlines the qualification rules and features for this scheme.
These are second home lifetime mortgage schemes. To understand their features, benefits and risks, please contact Equity Release Supermarket for a no obligation, personalised, key facts illustration. All quotes can be tailored to your own circumstances and you are under no obligation to proceed.