Second Home Equity Release 

Understanding your options for second home equity release

Equity release can be a flexible way to access tax-free cash when other financial options aren’t available or suitable. Here are the three main ways to use equity release with a second home.

Release equity from a second home you already own

Many people wonder if they can use equity release on a second home. The answer is yes—some providers allow homeowners aged 55 or over to release equity from a second property.

According to the English Housing Survey, around 2.1 million households had at least one second property in 2021-22, which means about 3% of households own more than one home. Most second homeowners are 55 or older, with 31% aged between 55 and 64 and 27% aged 65 and above. Since equity release is typically available to those aged 55 and up, many second-home owners could be eligible, provided other criteria are met.

Equity release could be a helpful option for those who need additional funds but want to keep their second home. It may be a good alternative to selling the property, remortgaging, or using equity release on their main residence.

The money you receive through equity release is tax-free and can be used however you like. Voluntary repayments are also an option if you want to manage the interest, which can help protect the inheritance value of your estate.

There are specialist equity release plans for second homes, though they can be less common. That said, many standard plans are available that might offer better terms.

Example

John and Sarah, both in their 60s, own a primary home and a holiday cottage. They need additional cash for travel and to help their grandchildren. Rather than selling the holiday home, they explore equity release as an option.

After speaking with a financial advisor, they decide to release 30% of their holiday home’s value through a specialist equity release plan. This gives them a lump sum of £150,000, which they use to cover their expenses. There are no monthly repayments, and the loan and interest will be settled after they pass away or move into long-term care.

Equity release allows them to maintain ownership of both homes while enjoying the extra financial flexibility they need for retirement.

Release equity from your primary residence to purchase a second home

If you’re considering buying a second property but lack the total funds, one option is to release equity from your primary residence. This could give you the necessary finances for a deposit or even cover the entire purchase.

For those nearing retirement, having a second property is often part of their long-term plans—perhaps a peaceful countryside retreat or a place to spend more time with family. Releasing equity from your primary home could be a way to make that vision a reality without selling or downsizing your existing residence.

With equity release, monthly repayments are not necessary unless you choose to make them voluntarily. Instead, the loan and interest accumulate and are paid off when the property is eventually sold, often when moving into care or after passing.

If you’re considering this route, speaking with a qualified adviser is essential. They can offer insights and guide you through the process, ensuring you have the necessary information.

Example

David and Margaret, both in their mid-60s, had their hearts set on a small cottage by the coast. However, they didn’t want to disrupt their lives by selling their primary home to afford it. Since their main property had appreciated considerably, they looked into releasing equity.

After consulting with a financial expert, they chose a lifetime mortgage to unlock 30% of their home’s value. This gave them a lump sum of £180,000, enough to purchase the cottage outright, with some help from their savings.

This solution allowed them to enjoy the best of both worlds: their new coastal home and primary residence. The loan and interest will be repaid when their main home is sold without immediate impact on their day-to-day finances.

Unlock equity from a second home during the buying process

Another option to consider is arranging an equity release on a second property while you’re purchasing it. This approach could be helpful if you prefer not to take out a traditional mortgage.

If you’ve already found a property but need additional funds to complete the purchase, an equity release plan could help bridge the gap. This is especially helpful if you’d rather avoid the long-term commitment of monthly mortgage repayments or if securing a conventional loan is challenging due to credit issues.

An equity release plan could provide the remaining funds needed for those who have most of the required amount but are falling short. A qualified adviser can guide you through the specifics and help you explore this option.

It’s important to note that you cannot have a residential mortgage and an equity release plan on the same property, so this strategy works best if you’re looking for alternatives to traditional financing.

Example

Emma, 60, had her sights set on a coastal cottage worth £350,000 but had only managed to save £250,000. Unable to qualify for a traditional mortgage due to her credit history, she explored the possibility of releasing equity from the property during the purchase.

Her financial adviser suggested unlocking £100,000 in equity as part of the purchase process. Emma could complete the transaction using her savings and the equity release with this approach. She now owns the property outright, free from monthly repayments, with the equity release loan being paid off once the cottage is eventually sold.

This allowed Emma to buy her dream home without relying on conventional financing.

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