Using equity release to buy a new home
Over the past few months, Equity Select have been helping clients across the Midlands purchase new homes when they felt that they would be too old to take out a mortgage!
When we think about equity release, we tend to think of using it to unlock equity tied up in our property. However, it can also work the other way round. You can use equity release to purchase a new home, for some this could mean moving to a more affluent area in the country. For others it may give them the opportunity to upgrade their current living situation.
Recent data from Canada Life shows the number of applications for a Lifetime Mortgage to purchase a property increased throughout 2020. In the first quarter of 2020 around 8% of applications received were in relation to buying a new home. This figure had increased to 18% by the last quarter of 2020. A combination of people reassessing their living situation due to national lockdowns, and the benefit of the Stamp Duty Holiday, make it easy to see where the increase has come from.
With the increased flexibility of equity release there are now more options than ever before for those looking to purchase a new home, even if they don’t meet the criteria set out by banks on a traditional mortgage basis. Whether it’s a new home, a second / holiday home, or even a rental property, there are options available for those over the age of 55 looking to finance properties.
One of the most rewarding situations we have been able to resolve recently was for Mr & Mrs Thompson.
The Thompsons had decided they wanted to sell their home in Staffordshire and move to St Leonards on Sea to be closer to their daughter and grandchildren. The property market is more expensive on the south coast and as a result if they sold their current home, they would only have been able to purchase a small flat close to where their grandchildren live. Not the ideal situation.
Mr & Mrs Thompson enjoyed spending time in their garden and loved their three bedroom house that had been their family home for nearly four decades. The thought of moving into a small flat with no private outdoor space had been putting them off moving for a long time. However, they felt like they were missing out on seeing their grandchildren grow up and wanted to be a bigger part of their lives. They contacted Equity Select to see if there was anything we could do to help them.
As they had owned their home for a number of years they had no outstanding mortgage to pay. The property was valued at £250,000 and, based on their age, we were able to find them a lender who would allow them access to a Lifetime mortgage of up to 40% of the new properties value.
Solution
The Thompsons were able to sell their home and use the £250,000 as a deposit towards their new home. We then were able to arrange a Lifetime mortgage of up to 40% based on the new properties value.
This meant Mr & Mrs Thompson could purchase a property up to the value of £415,000 using a Lifetime Mortgage and the sales proceeds from their current home.
Purchase Price: £415,000
40% Lifetime mortgage: £166,000
Deposit: £249,000
After less than two weeks on the market they accepted an offer on their home in Staffordshire and were in a position to purchase a two bedroom bungalow close to their grandchildren. It only took them a few days to find their new home in St Leonards. After arranging a viewing and having their offer accepted Equity Select were able to arrange their new lifetime mortgage and get the ball rolling!
By the end of March the Thompson’s had the keys to their new bungalow and were looking forward to moving in and spending the Easter holidays with their daughter and grandchildren. On top of this, thanks to the Stamp Duty Holiday, there was no tax to pay!
