Using Equity Release to Purchase a New Property
It is possible to use equity release to purchase a new property.
Lots of people want to move into their forever home, but it is simply out of their budget.
If you have an existing mortgage that you would like to pay off and own a property with a lot of equity built up inside, then you might be able to use equity release to pay off your existing mortgage.
Moreso, you might be able to use the remaining funds to buy a new property outright, or at least put down a chunky deposit [1].
Instead of releasing equity from your old home, you would potentially be able to take out an equity release plan on the new property you want to buy.
The conveyancing and purchasing of your new home, your pre-existing mortgage payment and the new equity release loan would happen at the same time.
The money from the sale of your previous house and along with the equity that you release from your new home will be enough to purchase your new home.
If you do so, you will rid yourself of the mandatory mortgage payments you have known for so long.
Do not forget that you will be charged interest on your equity release loan. As with any type of equity release loan, you might wish to pay off some of the interest on your loan to keep some of the compound interest at bay.
You can choose to either make some large lump sum payments, or a number of more ad-hoc payments. None of these are mandatory, although they are recommended if you can afford to do so.
Please call our 24-Hour Helpline for Equity Release Help: 0330 058 1579
Purchasing a holiday home using Equity Release
Yes, you are able to release equity from your home in order to purchase the holiday home of your dreams.
However, you do have to agree to spend a certain amount of time in both properties in order to qualify for equity release.
You will need to remain living in your primary residence for at least 6 months of the year in order to qualify for this type of loan [2].
The great thing about releasing equity from your home in order to buy a new property is that you will not have any mandatory mortgage repayments on your new property, as you will be able to buy it outright using the equity from your pre-existing property.
This means that you won’t have any more mortgage payments to make going into retirement.
However, it is important to understand that if you opt for equity release in order to buy a new holiday home, then you might need to pay stamp duty on your new holiday home.
Whether or not you have to pay stamp duty on your new home will very much depend on the value of your new home.
Likewise, if the property you plan on buying as a holiday home is abroad, then there will be currency exchange rates to consider as well as different laws and regulations in different countries when it comes to holiday homes.
Please call our 24-Hour Helpline for Equity Release Help: 0330 058 1579
Taking Equity Release from your Airbnb or holiday home
Until recently, there were very strict regulations when it came to what kind of properties you can and cannot release equity from.
However, an increasingly large number of lenders are now relaxing their qualification criteria.
Due to the relaxing of this qualification criteria, you are now able to release equity from a property where only one or two rooms within that property or using either as a B&B or holiday let in some way.
This also includes if you are listing and letting rooms out on Airbnb.
This is only applicable if only 50% of the bedrooms are used as a B&B, and no guest is allowed to stay beyond 30 days.
You are also able to release equity on a property if you have a tenant in that property.
Equity release plans are now available on tenanted properties if the tenant is staying in a self-contained part of the house.
This includes if you have a self-contained annex, a flat or a cottage which you let out to other people.
Lots of people who opt for equity release are entering retirement age. Therefore, some people who want to opt for equity release might have a live-in carer.
If your carer lives in an annexe or self-contained cottage on your property, then you will be able to be considered for equity release.
If you have previously applied for equity release but were rejected, then it might be worth reapplying now that the lending criteria has changed amongst a lot of lenders.
If you want to find out if you would now be eligible for equity release, then you will need to speak to a qualified equity release advisor who will be able to provide you with all of the relevant and necessary information you need to know in order to make an informed decision
Please call our 24-Hour Helpline for Equity Release Help: 0330 058 1579
What type of second property are you buying?
Whether or not you are able to release equity in order to buy a second property will very much depend on what type of second property you wish to purchase.
Whatever type of holiday home you wish to purchase, you will need to be open and honest with your equity release advisor about what type of property you are purchasing.
The type of property you want to purchase will have an impact on what type of equity release loan you should opt for.
For example, if you are buying another property in order to lease it out, then you will need to opt for a buy-to-let mortgage.
If you are releasing equity for a second property to be used as a holiday let, then there are specialised holiday let mortgages available.
This is for properties that have the intention of being rented out for parts of the year to holidaymakers and guests.
If you are buying a holiday home for yourself, your family and friends to use without charging them, then this would typically be covered by a second residential mortgage.
Tax and expense implications should be considered before releasing equity to buy a second property.
For example, additional stamp duty rates are charges for second properties in England and Northern Ireland – typically an additional 3 per cent.
In Scotland, this increases to an additional 6 per cent. Plus, the rental income from the second property in the UK is liable for income tax.
Please call our 24-Hour Helpline for Equity Release Help: 0330 058 1579
What else can I spend my equity release funds on?
There are a number of things that you can spend your equity release funds on if you do not want to buy a new property with the funds that you release from your home.
For example, you can use your equity release funds to make some home improvements and home renovations around the house [3].
This could include things such as a new extension, a landscaped garden or simply installing things such as handrails, ramps or a downstairs wet room.
Remember, if you opt for equity release then you will be expected to remain living in your home for as long as you live, or until you move into a care home.
This means that you might want to use your equity release funds to make your home safe and comfortable for yourself as you grow older.
Alternatively, you can choose to spend your equity release funds on your loved ones.
For example, some people who opt for equity release choose to spend the money they receive on helping their grandchildren with a house deposit or helping to pay for their further education.
You could alternatively choose to spend the money on a family for you and your family.
Most people who opt for equity release later in life do so because they simply want a better lifestyle going into retirement.
This could include eating out more, going on more holidays or buying the car they have already dreamt of. Most people dream of living a comfortable retirement, but the reality is that you might get to retirement age and struggle with your finances [3.
Opting for equity release could mean that you are able to live the retirement that you always dreamt of.
Please call our 24-Hour Helpline for Equity Release Help: 0330 058 1579
Speak to Equity Release Warehouse
If you are considering equity release, then you will need to speak to a qualified equity release adviser before making any decisions.
Our team are always on hand to answer any questions that you might have and will never put any pressure on you to release equity.
We will simply provide you with all of the relevant and necessary information you need to make an informed judgement.
Speak to our team of advisers today by calling us on 0330 058 1579 or by visiting us online by searching for www.equityreleasewarehouse.com.
References
[1] https://www.gov.uk/help-to-buy-equity-loan
