Equity Release for a Second Home

Do you wish less of your money was tied up in property? It’s possible to get an equity release for a second home or buy-to-let property, giving you a tax-free lump sum to spend as you choose – without having to reduce the size of your property portfolio. Here’s a quick introduction to equity release on a second home.

Get a tax-free lump sum to spend as you please

If you own a second home or buy-to-let property, it’s possible to free up some of the money you have in bricks and mortar via equity release. These plans – relatively new to the market – give you a tax-free lump sum to spend as you please. You might choose to supplement your retirement income, cover large one-off expenses or reduce other debt you may have. All without having to sell your property.

Perhaps best of all, many equity release plans come with flexible repayment options. In some cases you don’t need to make any monthly repayments at all, with the value of the loan and the accrued interest repaid on the eventual property sale, which happens when you pass away if you do not choose to sell the property sooner.

Are you eligible for equity release on a second home or BTL property?

You must meet certain eligibility criteria to apply for equity release for a second home or BTL property. You must be aged between 55 and 90, and the value of your property can be anywhere between £70,000 and £6 million – though some lenders may consider higher value properties.

Buy-to-let equity release

Buy-to-let equity release can be an attractive option for landlords, with rental income used to offset loan interest. There are typically no affordability checks and you can take out an equity release plan against multiple BTL properties. However, you cannot use buy-to-let equity release for the purchase of additional properties. You must also clear any existing mortgages with the money unlocked from the equity release plan before you use it for anything else. There may also be restrictions on the type of tenants you can let your property to.

Broadly speaking, there are three different types of equity release options available to the owners of buy-to-let properties:

  • You receive a one-off lump sum and no monthly repayments are due. The interest is added to the loan each month for the life of the loan, which is settled when the property is sold or you repay the full loan plus interest.
  • You choose to pay some or all of the interest on the loan via monthly payments, so the amount borrowed remains the same. The payment term can be from five years to the full term of the loan.
  • You can repay up to 10% of the initial loan amount each year without facing early repayment charges. This effectively allows you to repay the loan in full over time.

Second home equity release

To be eligible for second home equity release plans, you must use the property for at least four weeks per year. Additionally your second property should not be in close proximity to your main residence. The second home equity release plans are similar to the buy-to-let plans detailed above.

Would you like to discuss your options?

Prydis Wealth is a member of the Equity Release Council and has independent advisers who can recommend the equity release plans that best suit your personal and financial circumstances, with the lowest impact on the value of your estate. Get in touch to arrange a free, no-obligation meeting with one of our advisers by calling our office on 01392 432431.

Nothing in this article construes, or is intended to construe, financial advice. You should always seek advice from a professional financial adviser who is familiar with this type of arrangement to ensure any recommendations made are suitable to your needs and circumstances.