IMPORTANT: Equity Release is currently not available on second homes through our lenders. We are unsure when our lenders will lift these restrictions, but please let our team know if you would like to be notified when they do. If you would like to enquire about Equity Release on your primary residence, please click here.
Older homeowners commonly use Equity Release to release equity from their primary residence as tax-free cash. The great news is that if you own a second home in the UK you may be able to take out Equity Release on that property instead. For many, this is the best of both worlds – you get to access equity to live a better retirement, you still get to enjoy your second home forever, and you protect your main residence to pass on to loved ones. In this guide, we’ll explain how Second Home Equity Release works, whether or not you’ll be eligible, and what alternative options you may want to consider.
How Does Second Home Equity Release Work?
Taking out Equity Release on a second home works much the same way as a regular Equity Release product known as a Lifetime Mortgage. You can release up to 60% of the equity in the property as tax-free cash – either as a lump sum, as monthly income, or as ad hoc withdrawals whenever you need them.
You won’t have to pay any monthly repayments as the interest can roll up into the loan, and your provider will then recoup the loan and the interest when the property is sold. This means you won’t have to pass any affordability or credit checks as the loan is not dependant on your income. Alternatively, you can choose to repay the interest and/or the loan as you go to preserve your remaining equity.
Exactly how much cash you’ll be able to access will depend on the value of your property, how much equity you own, and your age – the older you are the more you’ll be able to release. You’ll still own your second home until you die, move into permanent care, or sell the property, and you’ll never go into negative equity. If you wish to let the property out you can do so for a maximum of 4 weeks at a time, but you must live in it yourself for at least 4 weeks each year.
What Can I Use Second Home Equity Release For?
Just like regular Equity Release, you can use the cash however you wish. Whether you want to travel the world, pay off your mortgage, or improve your home, you can use Equity Release to live a better life in retirement. Here are some of the most common reasons people release equity from a second home:
- home & garden improvements
- travel & holidays
- paying off mortgage
- paying off debts
- gifting to family & friends
- topping up retirement income
- reducing inheritance tax
Am I Eligible for Second Home Equity Release?
You’ll need to be aged 55 or over to take out any form of Equity Release. If you have a mortgage on your second home, some lenders may require you to pay it off before using the equity for other things – you can do this using some of the money you release. To be eligible for Second Home Equity Release you must:
- be aged 55 or over
- own a second home within the UK
- own a second home worth at least £70,000
- have paid off most or all of your mortgage (on the second home)
- live in the second home for at least 4 weeks each year
How Else Can I Release Equity From My Second Home?
There are other ways you can release equity from your second home and it’s important you speak to an experienced mortgage broker to find the right option for you. You may want to look into releasing equity by remortgaging your property, taking out a further advance, or getting a secured loan. The main difference with going down one of these routes is that you’ll have to pass affordability and credit checks, and you’ll usually have to pay monthly repayments.
You might also want to consider taking out Equity Release on your main residence instead of your second home. The disadvantage of this is that your main residence will be used as collateral for the loan, but you should be able to borrow more money and you’ll have many more products available to you, meaning you may be able to get a cheaper interest rate. To learn more about taking out Equity Release on your main residence click here.
The Bottom Line
If you own a second home in the UK you may be able to use Equity Release to release tax-free cash from the property. This means you can protect your main residence to pass down to future generations, whilst using some of the money tied up in your second home to enjoy your retirement. You’ll still own your second home and you’ll need to live in it for at least 4 weeks each year. You won’t have to pay any monthly repayments unless you choose to, as the loan and interest can be paid back to the lender once you die, move into permanent care, or sell the property. To find out whether lenders are currently offering Equity Release on second homes, and what deals are available to you, please contact our Equity Release team.
At Michael Usher Equity Release we’ve been helping our local community for 30 years. You probably have lots of questions, and we’re here to help you understand how Equity Release works and whether it’s right for your situation. We never push you, the choice 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!
