Releasing equity to buy another property

If you’re aged 55 or over, you may be able to use a lifetime mortgage, which is a type of equity release, to buy another property, including a new home, second home, holiday home or buy-to-let.

A lifetime mortgage (the type of equity release we offer) can help you unlock some of the money that’s wrapped up in your home. You can spend the cash on a few different things, including snapping up a new property.

It’s  a long-term loan secured on your home and it’s normally repaid by selling your property when you die or if you need to go into long-term care, depending on the provider’s terms and conditions. Until then, it remains legally yours.

It’s a big financial commitment, and it’s important to understand what it would mean for you. It will chip away at the amount of inheritance your loved ones could get. Plus, it can impact your tax position and your entitlement to means tested benefits. Lenders will also add interest each year onto both your loan and any interest previously added, which quickly increases the amount you owe.

You can use a lifetime mortgage to help fund the move to a new home, or you may be able to take an existing lifetime mortgage with you.

Buying a new home

You're thinking about moving to your dream home, but the budget's giving you pause. You're pondering a bigger mortgage, but getting approved isn't a sure thing. Plus, the idea of sidestepping those monthly payments is quite appealing.

This is where equity release could step in to help – by making it possible to borrow against your future home. The idea being, you sell your current home, pay off any outstanding mortgage, and buy a new property all at the same time. It’s that new house which would have the lifetime mortgage secured on it.

If you’re interested, you need to speak to an equity release adviser to find out how much you could afford to spend when property hunting. Then once you’ve tracked down your new dream home, you use cash from selling your current property along with equity release to buy it.

Moving your lifetime mortgage

If you already have a lifetime mortgage on your current property, you may be able to take it along with you if you move somewhere new. Different lenders will have different requirements for this. For example, with us, your new property will need to meet our lending criteria at the time.

If the new property doesn’t meet our lending criteria and you still want to move, you’ll need to repay your lifetime mortgage and any interest in full. You may also have to pay a large early repayment charge.

However, depending on the terms and conditions of your lifetime mortgage with us, and if you’ve had it for three or more years, you may be eligible for downsizing protection. Downsizing protection is where you’d be able to pay your loan in full without any early repayment charges, if you need to move to a new property that doesn’t meet our lending criteria. This would generally be if you were moving into a lower-value home. Other providers may also offer similar kinds of downsizing protection.

Yes, it’s possible to release equity to buy a second home by unlocking money tied up in your current one with a lifetime mortgage.

If you buy a second home using equity release, you’ll still need to live in your main home for at least six months of the year. There’s also the issue of stamp duty, depending on the value of your second home. And the usual costs of buying a property, like solicitor’s fees. 

You can use a lifetime mortgage to buy a holiday home, either here in the UK or abroad. You’ll bump into the same issues as buying a second home, such as associated costs. 

And if your holiday home is in the UK, you’ll have to contend with stamp duty too. If it’s somewhere further out, you’ll need to think about exchange rates and local laws and regulations.

Equity release could help you invest in a rental property or release cash from any you already own. However, you’ll need to check which providers will offer lifetime mortgages on buy-to-let, because not all will. It’s something that we don’t offer.

We are one of the UK's most established and trusted equity release lenders, with over 25 years' experience, we've helped over 284,000 people release more than £11 billion.

Buying a buy-to-let

If you want to use equity release to invest in a buy-to-let, you’ll have all the same issues that come with buying a second home. Such as stamp duty and solicitors’ fees. Plus, you may also have to pay tax on any rental income you make.

Taking out a lifetime mortgage on a buy-to-let

If you already own one or more buy-to-let properties, you may be able to use equity release to unlock some of the cash you have tied up in them – all without selling. That way, your rental income keeps rolling in, and you get a tax-free lump sum to spend however you want. 

The rules are slightly different with equity release and buy-to-let when it comes to the percentage you can release from your property. You’ll need to speak to an equity release adviser to find out what’s possible for you and your property portfolio.

With equity release, what’s right for you will depend on your particular circumstances. You should weigh the benefits, risks and costs carefully before acting. 

Things like minimum property values will apply. There are many considerations, which will change from provider to provider, that will affect if they’ll lend against a property or not.

Before you’re able to take out a lifetime mortgage, and to help decide what’s right for you and your circumstances, you’ll need to speak to an equity release adviser who’ll talk you through everything.