Can I Use Equity Release to Buy a New House?
Yes. A lifetime mortgage can sometimes be arranged at the same time as buying a new main residence. The purchase is funded using your deposit or sale proceeds together with the lifetime mortgage advance.
You may sell your existing home or use savings as the deposit, then combine those funds with a lifetime mortgage secured on the new property. This can help you buy a more suitable or higher-value home without taking a conventional mortgage with required monthly repayments. The new home must meet the lender’s property criteria, and the legal and mortgage work must be coordinated so that the lifetime mortgage completes alongside the purchase. Stamp Duty Land Tax, legal fees, moving costs and the long-term effect of compound interest must all be considered.
How a lifetime mortgage can help fund a property purchase
Equity release is often associated with borrowing against a home someone already owns. It can also be arranged on a property being purchased.
A common example is a homeowner selling their current property and wanting to move to a more suitable bungalow, retirement property or home closer to family. Their sale proceeds may not be enough to buy the chosen property outright. A lifetime mortgage can potentially bridge the gap.
The new property becomes the security for the lifetime mortgage. The solicitor coordinates the deposit, sale proceeds, mortgage advance and purchase completion.
Important: Do not exchange contracts until the lifetime mortgage offer, valuation and legal requirements are sufficiently progressed. If the mortgage does not complete, you could still be legally committed to the purchase.
How is the purchase funded?
The buyer contributes money from savings, investments or the sale of their existing property. The lifetime mortgage provides the remaining amount, subject to the lender’s maximum loan-to-value.
The solicitor receives and combines the funds before sending the purchase money to the seller’s solicitor on completion.
Does the new property have to meet special criteria?
Yes. The lender will value the property and assess its construction, condition, tenure, location, resaleability and any restrictions.
Flats, retirement developments, listed buildings, unusual construction and properties with commercial or agricultural elements may have additional criteria.
Can I buy a more expensive home rather than downsize?
Potentially, yes. The lifetime mortgage can supplement existing equity and allow the buyer to move to a property that costs more than the cash available from their sale.
The increased property value does not remove the cost of borrowing. Interest can roll up for life, reducing the equity ultimately left in the estate.
Can I use equity release to buy a second home or buy-to-let?
A standard residential lifetime mortgage is normally secured on the borrower’s main residence. Buying a second home, holiday home or investment property with released funds can introduce different lender, tax and suitability issues.
The source property must remain the borrower’s main residence under the plan terms. Specialist advice is needed before using the funds for another property.
Three equity release purchase scenarios
The arrangement can support different moving objectives, provided the property and funding structure are acceptable.
Buying a bungalow closer to family
Sale proceeds cover most of the purchase, and a lifetime mortgage funds the shortfall. The new property is valued and approved before completion.
Moving to a higher-value home
The buyer uses equity release to increase the available purchase budget. The long-term borrowing cost is compared with choosing a cheaper property.
Buying a retirement apartment
The lender reviews lease length, service charges, resale restrictions and occupancy conditions before deciding whether the property is acceptable.
Does the new home justify the long-term borrowing?
A better-suited property can improve retirement life, but the purchase should remain affordable after tax, fees and future interest.
Questions worth considering
- What will your current home release after sale costs?
- How much additional borrowing is genuinely needed?
- Does the new property meet lender criteria?
- What tax and moving costs will apply?
- Could a lower-priced property meet the same need?
What this means in practice
- Equity release can complete alongside a purchase.
- Your own funds normally provide part of the price.
- The new home becomes the mortgage security.
- Property approval is required before completion.
- Interest and fees reduce future equity.
Your questions answered
Can I arrange equity release before selling my current home?
The application can begin, but the purchase funding and legal structure must be clear. Completion usually depends on the agreed source of deposit and any related sale.
Will I have monthly mortgage payments?
A standard roll-up lifetime mortgage normally has no required monthly payment, although voluntary repayments may be available. Payment term products require contractual payments.
Can equity release pay the whole purchase price?
Usually not. Lifetime mortgage loan-to-value limits mean the buyer normally needs a substantial deposit from sale proceeds or other funds.
Can I use equity release for the Stamp Duty and legal fees?
Potentially, if the total borrowing and available funds are sufficient. Those costs should be included in the purchase budget from the outset.
Check the property and funding before making an offer.
This page provides general information, not personal advice. The Mortgage Hive can estimate the lifetime mortgage contribution, review the purchase property and compare the long-term cost with other moving options.
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This page is general information, not personal advice. Equity release includes lifetime mortgages and home reversion plans. To understand the features and risks, ask for a personalised illustration. Equity release will reduce the value of your estate and may affect your entitlement to means-tested benefits.