Equity Release is typically used by older homeowners to release equity from their primary residence as tax-free cash. However, if you’re a landlord, you may have the option of taking out Equity Release on your rental property instead. Although there are fewer products available for this type of Equity Release, some providers will consider your application. In this guide, we’ll explain how a Buy To Let Equity Release works, what the eligibility criteria is, and what alternative options you may want to consider.
How Does Buy To Let Equity Release Work?
Buy To Let Equity Release works in much the same way as a regular Equity Release product known as a Lifetime Mortgage. The main difference is that you’ll typically be able to release less equity from a Buy To Let – up to a maximum of 44% of the value of the property. Exactly how much cash you’ll be able to access will depend on the value of your property, how much equity you own, and your age – the older you are the more you’ll be able to release.
You can release the money as a tax-free lump sum or as monthly instalments. Some providers even let you make ad hoc withdrawals whenever you need to. You won’t have to pay any monthly repayments as the interest can roll up into the loan, and your provider will then recoup the loan and the interest when the property is sold. This means you won’t have to pass any affordability or credit checks as the loan is not dependant on your income. Alternatively, you can choose to repay the interest and/or the loan as you go to preserve your remaining equity.
Am I Eligible For Buy To Let Equity Release?
You’ll need to be aged 55 or over to take out any form of Equity Release. To be eligible for Buy To Let Equity Release you must:
- be aged 55 or over
- own a property worth at least £70,000
- have paid off most or all of your Buy To Let mortgage
- have tenants living in your Buy To Let property
- have assured tenancy agreements in place
How Else Can I Release Equity From My Buy To Let Property?
There are other ways you can release equity from your properties and it’s important you speak to an experienced mortgage broker to find the right option for you. You may want to look into releasing equity by remortgaging your Buy To Let property, taking out a further advance, or getting a secured loan. The main difference with going down one of these routes is that you’ll have to pass affordability and credit checks, and you’ll usually have to pay monthly repayments.
You might also want to consider taking out Equity Release on your main residence instead of your rental property. The disadvantage of this is that your home will be used as collateral for the loan, but you should be able to borrow more money and you’ll have many more products available to you. To learn more about taking out Equity Release on your main residence click here.
The Bottom Line
If you’re a landlord you may be able to use Buy To Let Equity Release to release tax-free cash from your rental property. This means you won’t have to put up your main residence as collateral, but there’ll be fewer products available to you than with regular Equity Release and you’ll only be able to access up to 44% of the value of your property. You can also look into remortgages, further advances, or secured loans, as alternative ways of releasing equity, and we can help you figure out which product is right for your situation.
At Michael Usher Equity Release we’ve been helping our local community for 30 years. You probably have lots of questions, and we’re here to help you understand how these products work and whether they’re right for your situation. We never push you, the choice is always yours to make, and we welcome your friends and family to join in the discussion. Book your FREE no-obligation consultation with one of our friendly advisors to learn more – this can be carried out remotely via phone or video call if you’d prefer. We look forward to helping you!
