Second Home & Holiday Home Mortgages | Compare Equity Release

What is a second or holiday home lifetime mortgage?

Lifetime mortgages are usually taken out on the property that you live in – your main residence. However, if you own a second or holiday home in the UK, there’s no reason why you cannot also take out equity release on that property too. We are specialists in this niche area and have access to plans across the whole market.

As second/holiday home plans tend to be specialist lifetime mortgages, the choice of lender is limited. These lenders may insist that the property is only used by the owner and their family, and for a minimum period of time. This is to ensure that the property is truly a second or holiday home, and not a buy-to-let proposition.

Some lenders do allow the property to be let – but under strict guidelines. These include the let being for a maximum of 4 weeks, that no formal agreements or Assured Shorthold Tenancies (AST’s) in are place and that the second property isn’t advertised for letting purposes, such as through any estate agency, or online.

Of the lifetime mortgage lenders that offer second/holiday home schemes, LV= have adapted both their lump sum plus and flexible lifetime mortgage to be used on second homes - but with a 10% reduction on LTV. Canada Life have specific products catering for second home ownership. We’re here to help you find the right plan.

How much can I borrow on a second home lifetime mortgage?

As with all lifetime mortgages, the lender simply takes into consideration the age of the youngest homeowner and the value of the property at the time when they are calculating how much they will lend with a second or holiday home lifetime mortgage.

Unlike residential mortgages (or other later life lending options such as retirement interest-only mortgages or retirement mortgages) your present and future income isn’t important, and neither is your monthly expenditure.

Your age is important though because the older you are, the more you can borrow. With second/holiday home lifetime mortgages, due to the extra perceived risk to the lender, the loan-to-values tend to be lower than standard lifetime mortgages.

Second home plans start at age 55 where typically you can borrow 19% of the property value. By age 75, you could raise upto 39% of the value of your second/holiday home. Using our calculator above, you’ll get an idea of the maximum you can borrow.

Compare the advantages and disadvantages of
second and holiday home lifetime mortgages

Advantages
Disadvantages

Advantages

Ability to borrow against the value of a second property

You are not restricted as to how many lifetime mortgages you have. You can have multiple plans covering multiple properties, subject to eligibility. This could even be in addition to, or as an alternative to securing equity release on your main residence.

You can receive all your money in one go or in stages

Enabling a choice of pay for ‘big ticket’ items or support your family financially by taking smaller chunks over time via drawdown.

There are typically no monthly repayments

The amount borrowed, and accrued interest is only repaid when you die or move into long-term care.

There is the option to borrow more

Depending on the lenders criteria, you may be able to apply for additional borrowing in the future.

Voluntary payment option

Allowing ad-hoc repayments of upto 10% per annum back to the lender, helping control the balance and your future inheritance.

Offers a no negative equity guarantee

To give you the peace of mind of knowing that when your plan is repaid, your loved ones will never be out of pocket.

Disadvantages

Limited choice of lender

As second/holiday home lifetime mortgages are specialist plans, there are only a few lenders that will consider lending on them.

Interest rates tend to be higher

Than with ‘standard’ lifetime mortgages. Again, this reflects the specialist nature of the plans.

You can typically borrow less

Than you can with a ‘standard’ lifetime mortgage as the loan-to-values are typically around 10% lower than normal.

Less flexibility than other lifetime mortgages

Most of these plans have limited options compared to traditional lifetime mortgages.

Your means-tested benefits could be affected

As you are receiving a large cash sum, any current/future means-tested benefits claimed may be affected.

There are early repayment charges (ERCs)

If want to repay your second/holiday home lifetime mortgage early, you may be subject to repayment charges. However, these charges will differ depending on your equity release provider, with both lenders offering tapered fixed ERCs over 8 or 10 years.

These are second or holiday home lifetime mortgage schemes. To understand their features, benefits and risks, please contact Compare Equity Release for a no obligation, personalised, key facts illustration. All quotes can be tailored to your own circumstances and you are under no obligation to proceed.