Second or Holiday Home Equity Release
Equity release schemes primarily lend on a main residence. However, there are additional plans available which enable a release of equity, where ownership is also present on a qualifying second homes. In 2017, we have seen the re-introduction of new Buy-to-Let Equity Release schemes and further Second Home plans, both helping boost options for the over 55’s in helping shape their retirement plans.
Based on their own standard product ranges, we now have equity release providers offering a range of options from lump sum, drawdown plans, voluntary payment or interest-only lifetime mortgages, all on second or holiday home basis. These particular lenders are currently LV= and Retirement Advantage. Additionally, to complement this 2nd home equity release property sector, we now have a range of Landlord Options from Retirement Advantage providing Buy-to-Let Equity Release.
Firstly, we shall focus on the Second/Holiday Home lifetime mortgages.
What are the Qualification Rules for Second/Holiday Home Equity Release Schemes?The owners of the second/holiday property must have attained a minimum age of 55, but be no older than 90 years of age. This applies to the youngest property owner should it be in joint names. Qualifying property values start from £70,000 and can go upto a maximum of £6 million and must be located in either England, Scotland or Wales. The amount that can be borrowed is based on the lenders standard terms for loan-to-value (LTV) criteria. This traditionally would start from 19% at age 55, rising to 50% between ages 90-95.
However, for second homes and holiday homes lenders will reduce their standard loan-to-value percentage due to the perceived risks involved. Therefore, a homeowner age 70 where the standard LTV is normally over 30%, Second/Holiday Home Equity Release plans will only lend a reduced maximum of 24% of the property value for second home equity release calculation purposes.
Definition of a Second/Holiday HomeLV= and Retirement Advantage define a second home as a property that must be available for the sole occupancy of the owner, or allow it to 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.
A holiday home shouldn’t be advertised, through an online letting agency and must not have any prominent signage indicating any lettings status.
For either second home or holiday home equity release qualification, the homeowners main residence should NOT be in close proximity, otherwise the equity release provider could decline any lifetime mortgage application.
Key Features of Second/Holiday Home PlansBoth second home providers use their core lifetime mortgage range to launch their holiday & second home lifetime mortgages. These come in a range of flexible features such as drawdown plans where lump sums can be taken in stages, rather than all in one amount. There are repayment options whereby the future balance can be either allowed to roll-up, or controlled by way of repayments; be it voluntary repayments or interest-only. Both schemes have the benefit of fixed early repayment charges of either 8 or 10 years maximum, dependent on lender, with no penalty existing thereafter.
Further Information on 2nd Home Equity Release SchemesAs the equity release product range continues to grow, niche areas of specialist lending including being able to release equity on a second or holiday home should continue to develop and innovate. There are currently two lenders that will consider lifetime mortgages on people’s secondary owned homes. LV= were the forerunners in this product range with Retirement Advantage now joining them. Both these equity release providers use their existing product structure to launch their 2nd/holiday home lifetime mortgage plans.
LV= 2nd home & holiday home products can be researched by following the specific LV= Flexible Lifetime Mortgage link and their Lump Sum Lite plans which can both be used for second home purposes.
Meanwhile, Retirement Advantage have three of their existing lifetime mortgage product range which they allow to provide a platform for their 2nd home/holiday home products. These cover the following Second Home Plans – Voluntary Select | Interest Only | Lifestyle Roll-Up
About Buy-to-Let Equity Release SchemesWe have now a dedicated BTL information page which can be found using this link – Buy-to-Let Equity Release.
Our complete range of equity release deals are available by visiting our equity release comparison tables, where you’ll find further information on LV= & Retirement Advantage products.
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These are 2nd home lifetime mortgages. To understand the features & risks request a Key Facts Illustration.