Equity Release Advice

Can I use Equity to buy a home abroad?

Can I use equity to buy a home abroad?

Brexit or no Brexit, there are still plenty of good reasons to own property in Europe (or even further afield), the weather often being just one of them. While it remains to be seen what effect (if any) Brexit will have on UK citizens' ability to work abroad, current practice and common sense both suggest that most, if not all, countries will continue to welcome people who can live without working, for example pensioners.

This suggests that if you have dreams of living abroad in retirement, or even just being able to go to your own home somewhere warmer whenever the weather in the UK gets too bad, Brexit may not be the end of them and equity release may help to make them happen.

The basics of equity release

Equity release essentially just means tapping into the value of your home without selling it. In principle, you can release equity by getting a regular mortgage. In practice, the older you get, the harder you may find it to be accepted for a regular mortgage and, if you are accepted, you will then have to commit to making the repayments regardless of your circumstances. If you do not, then your home may be at risk.

There are two other ways of releasing equity from your home and these are known as home reversion schemes and lifetime mortgages. In the former, a company buys a “share” in your home and when you die (or move into permanent care), they are paid the value of that share out of your estate (for example out of the proceeds from the sale of your home).

Lifetime mortgages are broadly similar to regular mortgages in the sense that you simply borrow an agreed sum against the value of your home, but unlike regular mortgages you do not necessarily have to repay the money before you die, so there is no risk of your home being repossessed if your financial circumstances change. There are, however, some lifetime mortgages which give you the option to repay the interest and/or the capital should you wish to do so.

Using equity release to buy yourself a home abroad

Where Brexit might (or might not) make a difference to UK citizens is in their ability to access financing for overseas property purchases. Right now, it is impossible to say exactly what the effect might be (and it could potentially vary between countries), but it's probably safe to assume that it has the potential to make it more difficult for people to get mortgages for international property purchases in the EU and/or for UK citizens to borrow from lenders in other countries in the same way that locals can.

If this is what happens, then life is likely to be much easier for those who can make cash purchases or, at the very least, can put down a hefty deposit and demonstrate a guaranteed stream of income to cover the mortgage. Depending on the value of your home (and your financial situation in general) then equity release could be used for either of these purposes.

For example, if you currently have a family home and were just looking for a little “pied a terre” somewhere warmer than the UK, then you might be able to finance the whole purchase with equity release and you might just opt for a product which was repaid after your death (or your move to permanent care).

If, on the other hand, you were considering a permanent move abroad and were looking for somewhere bigger, then you could use savings or investments to cover a deposit and release equity from your current home to cover the mortgage. In this case, you might want to look for a product which allowed early repayments if you decided that you were happy to sell one of your homes.

Equity Release refers to home reversion plans and lifetime mortgages. To understand the features and risks, ask for a personalised illustration.

Your home may be repossessed if you do not keep up repayments on your mortgage.

For pensions, savings and investments we act as introducers only.