The Question
My husband I live in London but own a holiday apartment in Devon which we use three or four times a year ourselves and rent to holidaymakers the remaining time. It makes us quite a bit of money but we also now need some extra cash as we wish to help our son and daughter purchase homes.
To access this cash we wondered if we could use equity release on the holiday home. We own it outright and it is valued at around £260k. We wish to release £120k.
Our questions are as follows: Can we release equity on a holiday home? And, if we decide to sell it further down the line could we pay off the equity release loan? Thanks for your advice.
Mark’s Answer
Thank you for your enquiry, and I can confirm that I have received many questions regarding releasing equity from second homes/holiday homes, and unfortunately, due to the current economic conditions, I have had to explain to these potential customers that providers of equity release on these properties have temporarily suspended their plans, and we are waiting patiently for them to return.
Many of these potential customers have asked to be kept informed when the plans return, and I would strongly suggest you register your interest with one of our friendly expert advisers on freephone number 0800 088 5874 and they will keep you informed as soon as possible.
In the meantime, I am happy to explain that while equity release schemes primarily lend on your main residence, there were several lenders that allowed you to release equity on a qualifying second/holiday home.
One equity release lender, Canada Life, defines a second home as a property that must be available for the sole occupancy of the owner, or allowed to be let-out for a maximum of four weeks consecutively.
The property must also be used by the homeowner for a minimum of four weeks every year and have no formal agreements or assured shorthold tenancy agreement in place (i.e. you are not letting the property out). A holiday home shouldn’t be advertised as such and must not have any prominent signage indicating any lettings status.
One prerequisite for releasing equity from a second home is that you must be between the ages of 55 and 95 and this applies to the youngest property owner, should you have joint ownership.
It’s worth noting that your main residence must not be near your second home, otherwise the equity release provider could decline any lifetime mortgage application; however, I note that your property is in Devon, and you live in London.
Qualifying property values start at £70,000, so once again your property would qualify, and properties must be situated in either England, Scotland, or Wales, so once again a tick in the box for you.
The amount you can borrow is based on the lender’s standard terms for loan-to-value criteria and before the plans were withdrawn, this traditionally started from 14% at age 55, rising to 45% between ages 90 to 95.
Don’t worry, this isn’t as complicated as it sounds, and as mentioned, register your interest with one of our friendly advisers, and they will inform you as soon as releasing equity from your second home is available and they will help and guide you through the process.
Meet our expert…
Mark Gregory, founder and CEO of Equity Release Supermarket, is here to answer your questions. Mark is an adviser himself with over 20 years equity release experience.
He launched Equity Release Supermarket 10 years ago and it has grown to become one of the UK’s leading equity release specialists.
Email kate.saines@emap.com to ask Mark a question
