Second Homes and Equity Release Lifetime Mortgages
Whilst traditionally equity release lifetime mortgages have been available on your main property for a number of years, it is now also possible to release equity on second homes.
To qualify as a second home the property must:
- Be available for the sole occupancy of the owner
- Only let out for a maximum of 4 weeks at a time
- Be occupied by the owner for at least 4 weeks of the year
Advantages of a Lifetime Mortgage on a Second Home
- You will still own the property and will benefit from any increases in value.
- You can access a tax-free lump sum when you need it to spend as you like, for example on property refurbishments, clearing debts or increasing your retirement income.
- You don’t have to make any monthly payments so the only costs will be any initial set up costs.
- Most lenders offer a ‘no negative equity guarantee’ which means that even if the value of your property were to fall and there was not enough to clear the loan at the end of the term, the lender would write this off.
Disadvantages of a Lifetime Mortgage on a Second Home
- You may be faced with early redemption charges if you want to repay the loan early and the plan doesn’t allow for monthly or voluntary repayments.
- Due to compound interest the amount that you need to repay at the end of the term will have increased considerably if you don’t make any interest payments.
- The interest rates applicable to second homes may be higher than those offered on main residences.
- The amount left in your estate for your beneficiaries will be reduced if the loan is repaid from the sale of your property.
Equity Release on your Buy to Let
Whilst traditionally equity release has been available on your main property, it is now also possible to release equity on buy to let properties.
To qualify as a buy to let the property must:
- Not be occupied by the owner at any time
- Be let out with an Assured Shorthold Tenancy agreement (AST)
Advantages of a Lifetime Mortgage on a Buy to Let
- The property will still be yours and you will benefit from any increases in value.
- You can access a tax-free lump sum, with no restrictions on how you spend it. This could be used to refurbish the property, clear any debts, or add to your retirement income.
- You don’t have to make any monthly payments so the only costs will be any initial set up costs.
- Most lenders offer a ‘no negative equity guarantee’ which means that even if the value of your property were to fall and there was not enough to clear the loan at the end of the term, the lender would write this off.
Disadvantages of a Lifetime Mortgage on a Buy to Let
- If your plan doesn’t allow for monthly or voluntary repayments you may be faced with early redemption charges if you want to repay the loan early.
- If you don’t make any interest payments during the term of the loan the amount you need to repay at the end will have increased considerably due to compound interest.
- The interest rates applicable to buy to lets homes may be higher than those offered on main residences.
- The amount left in your estate for your beneficiaries will be reduced if the loan is repaid from the sale of your property.
For more information please call Jerry on 0800 644 6555
