Equity Release is more popular than ever – the industry is now heavily regulated, and the newer products, known as Lifetime Mortgages, provide a fair, safe and trusted way to release equity from your home to enjoy a better life. These products are also extremely flexible and can be used in many different ways. The most common reasons for releasing equity are for travel, home improvements, paying off debts, or gifting money to family members. But what about moving to a new house, can you use Equity Release to buy your dream home? Absolutely you can. Many people are unaware that you can take out Equity Release on a new property, allowing you to enjoy your retirement in a home that you may not otherwise be able to afford. In this guide, we’ll explain how you can use Equity Release as a Lifetime Mortgage to purchase your dream home.
Can I Use Equity Release to Buy a More Expensive Property?
Many people wish to buy a more expensive property in later life. This could be to live closer to children, relatives or friends who live in a more expensive area, or it could be to live out your golden years in your dream home. No matter what your reason, the great news is that Equity Release can allow you to purchase a property that you may not otherwise be able to afford, and to pay off any outstanding mortgage on your current property at the same time.
If the equity in your current home, along with any savings, isn’t enough to buy your dream home, you can take out Equity Release on the new property to make up the shortfall. Of course, you may be able to take out a regular mortgage, but this is dependent on your affordability as you’ll have to pay off the interest and/or loan through monthly repayments.
Many older homeowners won’t be accepted for a regular mortgage, and many prefer not to take on the financial burden during retirement. Taking out Equity Release instead means you won’t have to be accepted based on your affordability as the interest can ‘roll-up’ into the loan. And there won’t be any monthly repayments to worry about, so you can spend your income on the things you love – your loan will only be paid back once you die or move into permanent care and the property is sold. Alternatively, you can choose to pay off the interest and/or loan as you go to protect more equity for your children’s inheritance. This can be done either with regular monthly repayments or ad-hoc voluntary payments.
Can I Use Equity Release to Downsize?
Many older homeowners decide to downsize to pay off the mortgage and live out their golden years with more financial freedom. However, if the difference in property value isn’t enough to cover your existing mortgage, you can release some equity from the new property to pay it off, along with any other debts, so you can live out your retirement without monthly repayments to worry about.
If the difference in property value is enough to pay off your existing mortgage and cover stamp duty and moving costs, you may still wish to release some equity from your new property for home improvements or to provide a tax-free cash reserve that you can draw down from in the future if you ever need to – without having to repay anything until you die or move into permanent care and the house is sold.
Can I Buy a Holiday Home or Buy To Let Property With Equity Release?
This is another option that is becoming increasingly popular, especially for homeowners who have built up a large amount of equity in their home. If you have enough equity to play with, you may want to purchase your second home outright so you don’t have to pass affordability checks or worry about monthly repayments which would come with a regular mortgage.
Owning a holiday home has obvious lifestyle benefits, but investing in a Buy To Let property comes with its own set of advantages, including the potential to use rental income to supplement your retirement income or to pay off the interest on your loan to prevent it rolling up. With the right property, you can even manage to do both, and you’ll own a profitable investment to pass on to loved ones when you die.
The Bottom Line
Equity Release is now a fair and safe way to improve your financial situation in later life by accessing some of the equity in your home. But a lesser-known strategy is to use Equity Release to buy a new home, even a more expensive one that you may not otherwise be able to afford. You can release money from the new property to make up any shortfall without having to be accepted for a regular mortgage or pay any monthly repayments unless you choose to. You’ll own your dream home, and you can live in it until you die or move into permanent care.
At Michael Usher Equity Release we’ve been helping our local community with trusted Equity Release advice for 30 years. You probably have lots of questions, and we’re here to help you understand how these products work and whether they are the right choice for your situation. We never push you, the decision is always yours to make, and we welcome your friends and family to join in the discussion. Book your FREE no-obligation consultation with one of our friendly advisors to learn more – this can be carried out remotely via phone or video call if you’d prefer. We look forward to helping you!
