An equity release scheme enables you to access some of the funds tied up in your property. One of the main benefits of these schemes is that you are free to use the money in whatever way best suits your circumstances.
For example, you may choose to receive monthly payments to top up your retirement income, help your children purchase their first property or fund another major purchase. One question that is often asked is whether you can use equity release to buy another house.
Can I use equity release to buy another house?
Yes, equity release can be used to buy another property, whether that is a buy-to-let investment or a holiday home.
Many homeowners see equity release as a practical solution when purchasing another property. For example, if you have found a new home that is outside your current budget, you may be able to use equity release to repay your existing mortgage while also providing additional funds towards the purchase, rather than taking on a larger traditional mortgage with higher monthly repayments.
Whether this is the right solution depends entirely on your individual circumstances. This is why it is important to seek expert advice and use an Equity Release Calculator to determine whether equity release is likely to be a suitable option.
Using equity release to buy a holiday home
Releasing equity from your main residence can be an option if you want to purchase a holiday home.
However, you will generally still need to live in your primary residence for at least half of the year. In addition, to avoid the need for a standard residential mortgage on the second property, many people choose to purchase the holiday home outright.
Can you release funds from a buy-to-let property?
Landlords may also be interested in releasing equity from a buy-to-let property.
You will normally need to provide details of your property portfolio along with your Assured Shorthold Tenancy (AST) agreement when making an application.
Although selling a buy-to-let property is another option, doing so may result in Capital Gains Tax. For this reason, equity release may be considered a more attractive alternative in some circumstances.
The process for releasing equity from a buy-to-let property is generally similar to releasing equity from your main residence.
As with any major financial decision, it is important to consider whether equity release is the right option for your circumstances. A useful starting point is to use an Equity Release Calculator to estimate how much you could release and whether it is likely to meet your financial objectives.