Buy-to-Let and Equity Release

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Home Buy To Let Mortgages Buy-to-Let And Equity Release

Author: Pete Mugleston

Mortgage Advisor, MD

Reviewer: Jon Nixon

Director of Distribution

Updated: March 15, 2024

How we reviewed this article:

Our experts continuously monitor changes in the financial space and work closely with qualified mortgage advisors for factual verification.

March 15, 2024

In this article, you’ll find out whether your buy-to-let (BTL) property qualifies for equity release, how much capital you could receive, and what alternatives you should consider.

What is an Equity Release Scheme?

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.

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

You can release equity from a buy-to-let property, usually by remortgaging to a higher loan-to-value (LTV) mortgage. Lenders will assess your eligibility during the remortgage process, considering factors like rental income, personal income, credit history, and your debt-to-income ratio.

While the vast majority of equity release providers may not accommodate buy-to-let properties, a select few do offer options. These providers cater to investment property owners with criteria that are similar but often more stringent than those of retirement lending companies focusing on residential homeowners.

For a professional landlord with a portfolio of properties, it may even be possible to release equity across all of them and take out a scheme based on your combined equity.

Considering equity release on a buy-to-let property should be approached with caution. It’s advisable to seek professional advice from a broker first. Releasing equity from a property is a significant decision, necessitating a thorough exploration of all alternatives. If equity release proves to be the right choice, finding the best deal available on the market becomes paramount.

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What schemes are available?

The only equity release schemes for buy-to-let property owners are the rental property equivalent of lifetime mortgages. The 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 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?

The maximum amount of equity you can potentially release from a buy-to-let property through a lifetime mortgage equivalent could be anything from 10% up to 60%. 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 and health

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. The older you are, the more equity you can release.

Use our calculator below to see how this could work out for you.

Equity Release Calculator

Use this calculator to determine how much capital you could unlock from your home through equity release, based on your age and the property's market value.

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For joint applications the amount you can release is based on the age of the youngest applicant
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Your Results:

The Maximum Equity you could release is

The amount is of your homes value, the maximum most borrowers your age can release.

Get Started with an Equity Release Specialist and find out exactly how much you could release.

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How to get equity release for a buy-to-let property

Buy-to-let equity release is complex, so it’s important you get expert help to find a lender. Get in touch with us and we’ll match you with a buy-to-let equity release specialist who can guide you through the process.

They’ll be able to help with the following steps.

Getting your documentation in order

As for any mortgage application, you’ll need ID and financial documents like bank statements and proof of income. You’ll need to show evidence of your existing buy-to-let properties, the equity you hold and the income you’re currently earning from them.

Calculating how much equity you can release

This isn’t a given – it can vary significantly depending on your circumstances, particularly your age and current health. Your broker can help you work out exactly how much you may be eligible to borrow.

Putting together a case for your new purchase

Your new lender will want to see that a new buy-to-let purchase is going to be profitable, so you’ll need to evidence projected income and associated costs to show that you can afford the new mortgage.

Eligibility criteria

You will need to be aged 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.

Here is a quick summary of the requirements for buy-to-let equity release…

  • Applicants must be aged 55 or over
  • Must hold enough equity in your buy-to-let
  • Must have tenants in their BTL
  • Have an assured tenancy agreement 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.

Pros and cons of equity release

Equity release for buy-to-let isn’t for everyone, so it’s important to consider the pros and cons before deciding if it’s the right option for you.

The benefits of buy-to-let equity release include:

  • Accessing cash that’s locked away in properties following growth in house prices
  • Making use of the value of your current investments to grow your portfolio
  • You don’t need to sell existing investments to buy new ones
  • You don’t have to use your own home as collateral

There are also risks to consider:

  • Equity release can be an expensive form of borrowing and you could end up owing against the whole value of the property
  • Once you’ve taken equity release, you won’t be able to secure any other loans against the property
  • You may reduce the value of the inheritance you leave

Your broker can talk through how these risks and benefits might apply to you.

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.

There is a 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 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 equity 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.

What would happen to your tenants?

Having tenants does make things a bit more complicated and lenders will usually have specific requirements to protect themselves from being left with sitting tenants at the end of the agreement.

Typically this means having an assured tenancy agreement of less than 12 months – as long as this is in place then your tenants should be unaffected and able to stay in the property until you either die or go into long-term care.

How Online Mortgage Advisor can match you with the right expert

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.

We offer a free broker-matching service that will help you find the perfect advisor. 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 Online Mortgage Advisor of course!

Read more about Pete

Pete Mugleston

Mortgage Advisor, MD

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