Equity Release to Buy a Holiday Home Abroad?

Many people dream of one day owning a holiday home abroad- but is it possible to use Equity Release to make this dream a reality? First, you need to find out whether or not it’s a feasible option for you. So, can you use Equity Release to buy a holiday home?

Yes, you can use the funds from the Equity Release to buy a holiday home abroad or overseas either as a purchase outright or towards a deposit.

It’s a great way to get the most out of your property and enjoy some sunshine and relaxation in retirement. Many people around the country have used Equity Release to follow their retirement dreams and buy a second property.

The most popular way of doing this is via a lump lifetime mortgage. This type of Equity Release allows you to release all of your home’s equity upfront so you can use the funds towards a home purchase or deposit.

There are a number of things to consider before you go ahead with this though. When you take out Equity Release on your current home, you will be required to live in for the last least six months for every year, meaning you will not be allowed to relocate permanently. This is because Equity Release is required to be done on your primary residence.

Here is a quote from an Equity Release article in the Telegraph. Mr Wilkie said: “Lots of our customers see themselves splitting their time between the UK and abroad. It’s not just sunnier climates they’re after.

They may have family abroad, fancy an alpine winter or want to experience new cultures. As long as they maintain the property, are a UK taxpayer and reside in their UK home for at least 183 days a year, they should be adhering to the terms and conditions of the lifetime mortgage.”

Of course, if you don’t mind spending 6 months in the sun and 6 months back in the UK then Equity Release may be a solution for you. You could spend the winter months abroad soaking up the sun and the summer months back in the UK.

Example of using a lifetime mortgage to purchase a home abroad

Mrs and Mr Jones have an outstanding mortgage of £40,000, however, their home has a market value of £200,000. They are both aged 56.

Based on their homes value and their age they can release a maximum of £150,000 in equity from their home. However, once their mortgage is paid off the total value of equity left will be £110,000 for the purchase of a holiday home.

Alternatives ways to buy a holiday home abroad

Equity Release is just one way of freeing up homes for a holiday home or property abroad, but in fact, there are many alternatives to Equity Release.

You can use a lump sum payment from your pension or downsize your home to potentially free up funds for a home abroad.

Another option is to take out a mortgage on the holiday home, though you’ll need to be comfortable with the idea of taking on two mortgages at once.

This is a perfectly viable option for many people, but it’s important to make sure that you’ll be able to afford the mortgage payments on both properties and that you’re comfortable with the idea of potentially losing money on the investment.

You could also consider selling your current home and using the proceeds to buy a holiday home outright. This option may be more desirable if you’re not comfortable with the idea of taking on a new mortgage.

Can I use Equity Release on a holiday home?

Yes, you can get Equity Release on a holiday home however because it is not your sole residence you may be able to borrow less than you would normally and the loan value could be capped at a certain percentage.

Can you get Equity Release on non-standard construction?

UK Equity Release providers have strict rules on property that are accepted. The types of property that would be classed as non-standard properties include:

• Timber Houses
• Steel Frame Houses
• Concrete constructed homes
• Tin roof homes
• Holiday park homes
• Other non-standard construction of homes.

Can you get Equity Release on a flat?

You can get Equity Release if you own a leasehold or freehold flat or property if also you own the leasehold. In the event that you do not have a lease, you will be able to construct the leasehold title along with the Equity Release.

Conclusion

In conclusion, an Equity Release can be used to buy a holiday home abroad, but you will need to adhere to the terms and conditions of the product. There are a number of other options available, so it’s important to consider all of your options before jumping into that dream holiday home.

We would recommend speaking to an advisor who can help weigh up all your options. You can start by using our equity release compound interest calculator to work out the maximum you can lend on your property. It can also be a good idea to use an approved UK Equity Release provider who is part of the Equity Release Council.