Using equity release to buy a new property

Wondering whether you can use equity release to buy your new home? The simple answer is, yes you can. The relevant eligibility criteria must still be met – the same as if you were exploring equity release on your current home.

There are many circumstances when equity release could be considered as an option to purchasing your next home. Maybe you…

  1. Can afford the monthly repayments on a traditional mortgage, but don’t want to be committed to making them.
  2. Have been refused a traditional mortgage. Since a lifetime mortgage doesn’t require you to make monthly repayments it’s not based on affordability or your credit history.
  3. Have an interest-only mortgage which is coming to an end and don’t have enough equity to buy your new home once the outstanding balance on your interest only mortgage has been paid off.
  4. Would like to move to your forever home but it’s out of your budget. Often more accessible properties such as bungalows are more expensive than houses due to supply and demand. Cash from your current property along with the equity you release from the new home could give you enough to purchase your new home.
  5. Have enough money to buy your new home, but then wouldn’t have enough savings left over to meet your lifestyle requirements or to improve the property to your standard.


These are all scenarios in which equity release can be used.


How using equity release to buy a property works

The process of releasing equity to purchase your new property is actually very similar to the conventional mortgage route. The only real difference is the type of mortgage you will have on your new property – a lifetime mortgage. The property sale, mortgage repayment and new property purchase will all be finalised at the same time.


Once you have found the property you wish to buy, you sell your old home, clear any existing mortgage and move into your new home (which will have the equity release mortgage on it). The result is that you have the new home you want, without the need to make monthly payments.


Putting it into practice


Mr & Mrs Smith aged 66 and 63

Existing property value – £285,000

Outstanding mortgage – £75,000


When they sell their existing property they will have a £210,000.


Based on their ages (Mrs Smith as she’s the youngest), the maximum percentage of their property value they can release is 37% with a standard lifetime mortgage.


With an equity release purchase, they could buy a new property with a value of £330,000 (£210,000 + £120,000 equity release mortgage on the new property).


If they decide that they want to buy a cheaper property they could still use a lifetime mortgage to fund renovation work, home improvements or anything else they wish. All with the peace of mind of knowing that they will own it, won’t have monthly payments to make and can never fall into negative equity.


A look at the costs

As well as the usual costs incurred when you move to a new house, such as valuation fees, removal costs, stamp duty, and estate agency fees, there will also be costs associated with taking out an equity release plan. These are usually:

  • Advice fee – if you come to us for advice then we charge a fixed fee of £995 payable only upon completion. This can be added to your loan and offers good value for money compared to some of our competitors who charge a percentage of your release amount.
  • Lenders arrangement fees – normally free as the market is very competitive, however, sometimes a better rate is available with a lender fee which can be anything up to £950. We will, of course, offer you all options.
  • Solicitors fees – you will need a solicitor to deal with your purchase, and potentially sale conveyancing. This can be the same solicitor or different ones


When in the house buying process can I explore equity release?

You can come to us at any point, but coming to us early enables you to get the relevant information to help with your new property search for example:

  • what value properties you can potentially purchase, and
  • what aspects of a property to avoid which may not pass equity release lenders eligibility criteria.


However, before you start your application it is best practice to have an offer accepted on your current home (if applicable) and an offer accepted on your new home. This way, when completing our research, we’ll have accurate sale and purchase prices on which to base our recommendation, giving you accurate interest rates and plan features.