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Buy-to-Let and Equity Release

Secure your equity release with expert guidance from a specialist broker

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Pete Mugleston

Author: Pete Mugleston - Mortgage Advisor, MD

Updated: August 25, 2021

Equity release allows property owners over 55 to access some of the capital they’ve built up while paying off their mortgage, as a tax-free loan. While it’s more common for people to use this type of retirement borrowing on a residential home, there are potential ways for buy-to-let (BTL) landlords to take out equity release on their investment properties, too.

In our guide to equity release for buy-to-let property owners, you’ll learn whether you qualify for BTL equity release, how much capital you could potentially release, and what alternatives you should consider before choosing an equity release scheme.

Can you take an equity release mortgage on buy-to-let property?

Yes, but you might find your options very limited. The vast majority of equity release providers will turn you away outright if the property you’re releasing capital from is a buy to let, but that isn’t to say it’s impossible. A very small minority of providers cater for investment property owners using a similar, yet often more stringent, criteria to the retirement lending companies who work exclusively with residential homeowners.

If you’re a professional landlord with a portfolio of properties, it might even be possible to release equity across all of them and take out a scheme based on your combined equity.

You will need to be aged over 55 or over to qualify for an equity release scheme of any kind, but if you meet the rest of the provider’s requirements, the capital you release can be used for pretty much any legal purpose, from home improvements to funding a holiday.

If you’re considering taking equity release on a buy to let, it’s a good idea to speak to a broker for professional advice first, as releasing equity from a property isn’t something you should do lightly. You’ll need to consider every alternative and, if equity release is the right option, make sure you end up with the best deal available on the market.

Not only can a specialist equity release broker go through all of the options available to you in detail, they will search the entire market to find the best product for you, guide you through the application process and help you with any paperwork along the way.

What schemes are available?

The only equity release schemes for buy-to-let property owners are the rental property equivalent of lifetime mortgagesThe providers who offer them don’t call them lifetime mortgages as they don’t fit the Financial Conduct Authority’s (FCA) definition for these products, but they are essentially the same thing, and different in name only.

How do buy-to-let equity release mortgages work?

If you take out one of these products, your equity release provider will place a charge on your investment property, and in return, you can release some of the capital you’ve built up either in the form of a lump sum or monthly instalments.

There aren’t any mandatory monthly payments to make during the loan term since the interest can be rolled up and added to the debt at the end of the agreement, which won’t come until the last surviving borrower passes away or enters long-term care. There are, however, products that give you the option to make capital repayments during the term.

If your property declines in value and leaves the provider with a debt they’ll struggle to recoup, there is no danger of your beneficiaries being hit with the bill for this. This is thanks to measures from the Equity Release Council called the Negative Equity Guarantee.

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How much equity can you release from a buy to let?

The maximum amount of equity you can potentially release from a buy-to-let property through a lifetime mortgage equivalent is up to 44% of its value. The exact amount of equity you can release from your BTL will depend on the following factors…

  1. How much your property is worth
  2. How much equity you’ve built up
  3. Your age

Obviously you’d be able to release more capital from a high value property with plenty of equity than you would from a low value one with minimal equity. But age is an important part of the provider’s calculation. Older borrowers can release more equity than those who’re likely to live longer, and the highest loan-to-value ratio is usually reserved for them.

Eligibility criteria

To get the buy-to-let equivalent of a lifetime mortgage, you’ll need to meet this criteria…

  • Aged 55 or over
  • Hold enough equity in your buy to let
  • You must have tenants in your BTL
  • An assured tenancy agreement must be in place

The exact amount of equity you need to hold may vary depending on other factors, such as your age and the overall strength of your equity release application.

What alternatives are available?

Lifetime mortgage equivalents aren’t the only option if you want to release equity from a buy-to-let property. At this point, we should clarify that equity release and releasing equity are two different things. Equity release is a specific product type aimed at people in later life, while releasing equity can simply refer to unlocking some of the capital in your property.

Obviously there is crossover between the two and some of the other ways to release equity are viable equity release alternatives. The most popular ones include…

  • Remortgaging: Refinancing is another way that you could raise funds through a buy-to-let property you own. Most mortgage lenders will let you borrow up to 75% of the property’s value if you hold enough equity. See our guide to buy-to-let remortgages to find out how this works and whether it’s the right option for you.
  • Secured loans: If you don’t want to remortgage or take equity release (or you’re not eligible for either) a secured loan could be an option to consider. This is basically a secondary mortgage secured against the equity in your property. Lenders are known to be generous with the amount you can borrow, as long as they’re convinced you can make the repayments in addition to any primary mortgages you have.
  • Further advance: Getting a further advance on your existing buy-to-let mortgage could be a third alternative to consider. This would involve undergoing affordability and credit checks again with your current lender so they can make sure you’re eligible, but your existing relationship with them might help you qualify.
  • Equity release on your home: If you own a buy-to-let property and your own home, it’s worth thinking about the pros and cons of taking equity release on one over the other. Putting a lifetime mortgage on your BTL means that you wouldn’t have to put up your main residence as collateral, but taking enquiry release on your home means you can potentially borrow more and have a wider choice of products.

Whether you should take equity release on your buy-to-let property or choose one of the other options listed here is a question to put to a mortgage broker. We work with experts who specialise in both equity release and buy to let, and they will be able to go through all of the available options with you and help you make the right decision.

Speak to an expert about equity release for buy-to-let property owners

If you’re considering taking equity release on a buy-to-let property, it’s always a good idea to seek professional advice before you get started. The right broker will have the knowledge and expertise to help you make the right decision, whether that’s a lifetime mortgage equivalent or one of the alternatives to buy-to-let equity release.

We offer a free broker-matching service that will help you find the perfect advisor for you. It will take your circumstances into account and pair you with an expert who specialises in buy to let and equity release. We will only introduce you to a broker we’ve vetted ourselves, so we can vouch for their track record when it comes to helping customers just like you.

Call 0808 189 2301 or make an enquiry online and we’ll set up a free, no-obligation chat between you and the broker who is best positioned to help you out today.

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About the author

Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.

Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for OMA of course!

Read more about Pete

Pete Mugleston

Mortgage Advisor, MD

FCA disclaimer

*Based on our research, the content contained in this article is accurate as of the most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs.

Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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