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Is it a Good Idea to Release Equity to Buy Another Property?

Yes, remortgaging a property to free up the capital that is used to help buy another property is a common method that homeowners use to increase their portfolio. Some purchase-to-rent lenders lend up to a maximum loan value of 85%, and affordability is based on the level of rental income the property can achieve. It is possible to free up capital to purchase a second property, such as a vacation home, investment property, or rental investment. The net value of the home is the absolute value of your home that you own, which is calculated by subtracting any debt linked to your property from the current value of the property. The issued capital is tax-free, is paid as a lump sum and is yours for you to spend as you wish.

If you do not have capital, it will not be possible to remortgage. Some lenders can lend up to 95% of LTV (loan-to-value ratio), subject to other criteria, but the rates offered are likely to be high. For many older borrowers, freeing up capital to buy another property is an effective way to free up cash without having to consider selling. Often, you can access this capital through the process of increasing your mortgage, and many people use this money to invest in another property. In most cases, you'll have to remortgage to release the capital of your current property.

The process of applying for a new mortgage is similar to that of applying for any mortgage and will generally be based on your ability to repay the amount you want to borrow. Your personal financial situation, such as your outgoing income and expenses, will be reviewed before your application is approved. The bank or mortgage company will also review your credit history and any additional debts you may have, such as credit cards or other loans. The obvious advantage of releasing equity is that it gives you money to spend now, rather than leaving you locked in your house. The prolonged rise in house prices in the United Kingdom means that a large proportion of homeowners' wealth goes to their properties and is therefore inaccessible.

If the value of your home has increased over the years, freeing up capital allows you to use some of that money to supplement your retirement income, rather than leaving everything in the hands of your beneficiaries or to cover the costs of long-term care. They can offer you a free, no-obligation talk with your information team and, if you're ready, book an appointment with a capital release advisor. Responsible will only deal with lenders who are members of the Capital Release Council, which means that you will be protected by a non-negative capital guarantee that will ensure that you never owe more than the value of your home. Creating a capital release plan involves numerous upfront costs, so make sure you're clear about all of them before continuing. Downsizing or freeing up capital are two ways to unlock capital in your home, to help your finances during retirement. Even if you have been denied capital release in the past, regular changes and updates mean that there are now more options available.

As an additional guarantee, ask your lawyer to review the agreement you have with the capital release company before you sign it. If you're worried that your capital release request will be rejected, the best thing to do is to get a free confidential quote. The most popular type of capital release product is a lifetime mortgage, which allows you to access a lump sum in tax-free cash with the capital of your home without selling it. So, whether you're looking to borrow more money from your current mortgage lender or if you want to remortgage to release equity at a new bank or mortgage lender, Private Wealth Mortgages can help. To understand all the features and risks of a stock issuance plan, request a custom illustration.

The percentage you can release (amount between loan and value) for purchase-to-rent properties will differ slightly from that of the capital release of your main home. Older homeowners are increasingly using freeing up capital for home improvements as an alternative to taking out additional loans on a mortgage. A capital settlement provider will provide you with a lump sum or income in exchange for a portion of the value of your home. The method you use to free up equity to purchase a second property will depend on the options available, which will be based on your personal circumstances.

Nigel Cook
Nigel Cook

Coffee expert. Hardcore social media fan. Wannabe tv junkie. Amateur web fanatic. Incurable internet scholar. Infuriatingly humble travel trailblazer.

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