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Hi Garry,
Yes, you may be able to release equity from your primary residence to funds the completion of your second property. Here are a few potential options:
You could consider re-mortgaging your primary residence to release equity. This involves taking out a new mortgage on your property (or capital raising with your current lender), and borrowing more than the outstanding balance. The additional amount could then be used to complete the build. It is important to note that not all lenders will allow you to capital raise for this reason, so you should be upfront with them to make sure you don’t run into problems during the application. The amount you borrow (the existing loan plus the new amount) will need to meet with the lenders affordability model as well.
If you’re over a certain age (usually 55 or 60), you may be eligible for equity release schemes. These schemes allow you to release equity from your primary residence without having to make regular repayments. However, it’s crucial to carefully consider the long-term implications and seek independent financial advice, as these schemes can significantly reduce the value of your estate.
You may also qualify for a bridging loan which would be secured against your existing property. These can all be set up without having to make regular payments, but the loan to value allowed tends to be lower than a re-mortgage (usually around 65%) and the terms would only for 12 months, after which the bridging loan would need to be repaid, either through the sale of one of the properties, or new finance.
If the property you are building will ultimately be your main residence, you could also consider taking a self build mortgage to finish the property which can run alongside your current main residence mortgage.
Before proceeding, it’s advisable to consult with a specialist mortgage advisor to explore the best option based on your financial situation, risk tolerance and long-term goals.
Best of luck with your project plans,
Rachel Pyne (Build It’s finance expert)