You have already established yourself on the property ladder as you have a London Pad to enjoy. Unlike many first time buyers who wish to purchase homes in London, but cannot afford the down payment, you have done your time, purchased property, and now you are retired. Now you have time on your hands and plenty of opportunities to make the most of it. In fact, you could decide to join in the rush to the alternative property ladder. Equity release enables you to have a second property investment. Your London location makes it doubly perfect since your home value is significant compared to other counties and parts of the UK. Complete your London equity release calculation now to see if the figures are appealing to you and how much you can potential raise.
Buying in the Alps
Have you wondered what it would be like to have a dream home in the Alps? You no longer have to wonder if you are a property owner in London with equity to tap into. A home in the Alps can be as little as 120,000 Euros. Even if you wish to stay in the UK to buy property there are at least 49 counties you could take advantage of regarding housing prices. You could have a home on the coast, watching the waves roll by, and getting a little summer sun.
Wherever you buy your second property is of a little consequence. More importantly, the fact that you can buy another home for holiday and family use is vitally important.
How a London Equity Release Works
There are two forms of equity release: home reversion and lifetime mortgage. Home reversion is not the most advantageous if you are considering buying a second home. It involves selling a part of your main property to release equity. You do have a lifetime tenancy agreement that allows you to remain in your home rent free, but in the end the home usually has to be sold to the provider. It also means giving up a portion of your control in the home. Not so good if the London pad you live in severely goes up in value.
Lifetime mortgages have their own disadvantages; however, they can be quite useful to get you into the alternative property market outside of London. If you take out a lifetime mortgage, you do not have to make a repayment on that loan until you move out of the home, die or move into a long term care home. Newer schemes from the likes of Hodge Lifetime, Aviva & more2life will allow you now to make repayments; either interest only or even upto 10% of the original capital amount borrowed each year. For flexibility these are now becoming the most popular forms of London equity release schemes without doubt.
A London equity release scheme in loan form accrues interest unless you choose the interest only lifetime mortgage as previously mentioned. This mortgage offers a payment of interest each month, while keeping the principle balance the same. It works if you have disposable income to make the payment with and now comes under the remit of MMR (mortgage market review). This places the onus of affordability onto the equity release company so they must evidence sufficient disposable income to service the loan.
For lifetime mortgage loans you need to be at least 55 years of age; while home reversion requires you to be at least 65 years old. This can also determine the product that is most useful to you based on individual criteria.
The Return for your Lifetime Mortgage
One of the reasons it makes the most sense to choose a lifetime mortgage is because you retain full ownership of your London property. You can sell it for full market value in the future should it be necessary in order to repay the loan, or port it to a new property. These important, yet flexible features are part of the Equity Release Council’s 5 Code of Conduct principles which were original formed by SHIP (Safe Home Income Plans) They are the equity release industry’s trade body to which advisers, brokers & solicitors can now join.
Now since we are discussing the concept of taking out the equity release on a second property investment, there is a silver lining to the disadvantage stated above. When you use the loan for other purposes like holidays, university expenses for your children or grandchildren, it is less likely you will see a return on your investment.
Investing in a second property potentially brings you a return. You could sell the second property to pay off the lifetime mortgage in full. However, as with any equity release mortgage always be aware of early repayment charges that may exist. Upon repayment however, this would leave the main London property for your children as an inheritance.
To determine your return on investment (ROI) and potential costs do an equity release calculation beforehand to establish the maximum equity release possible.
Calculating Loan Amounts and Cost
Your age, property value, health concerns, and potential fixed interest rates will all determine the amount of the lifetime mortgage availability. When you set up the lifetime mortgage, you will have projections for the amount of time you live versus the eventual cost of the mortgage. This helps you plan your inheritance, home sales, and decide if equity release is right for you.
An equity release calculation is always based on age, property value, interest rate, and potential life expectancy. When it could lead to a second holiday home for your retirement years it is worth examining. Afterall life is for living, but not at all costs. So ensure you obtain independent mortgage advice from a London equity release adviser near to you.