August 21st, 2020

Can you release equity on a buy to let property?

In this short article we answer the question: can you release equity on a buy to let property? Let’s lay out your options and explain how you can make your financial decisions with confidence. 

Can you release equity on a buy to let property?

You want to raise capital but you are reluctant to put your primary residence at risk. Well, there’s good news for landlords like yourself. You can indeed release equity on a buy to let property. In some cases the funds you release may even be paid to you tax free.

However, be judicious. There are a number of different equity release options available – each with its own implications. It’s important to consider your options carefully in order to make a decision that makes sense for your personal financial landscape.

More on that shortly.


What can you use the capital for?

You get a lot of freedom with buy to let equity release. You can use the capital you raise for whatever you wish – whether that’s a fancy convertible for your driveway, paying the deposit on your next BTL property, boosting your retirement pot or anything else you can think of. There are zero limitations. That’s ideal if you are one of the many landlords in the UK who is asset rich but cash poor due to your wealth being tied up in bricks and mortar.


What options are open to you?

There are several ways to release equity on a buy to let property. Let’s take a look.


Buy to let mortgage

One of the most well-known options for releasing equity on a buy to let property is to take out a new mortgage against the property. Note that if you already have a mortgage on the property, you will need to borrow enough to pay off the remaining mortgage balance – on top of the amount of capital you wish to borrow. For example, if you owe £50,000 on the mortgage and want to borrow £30,000, you would need to take out a new mortgage for £80,000 with a new lender.


Buy to let further advance

Essentially this is an extension of your current mortgage. Your current provider lends you additional funds on top of your existing arrangement. It’s usually the most straightforward way to generate capital, but watch out for high interest rates.


Buy to let secured loan

If you are keen to keep your current mortgage arrangements as they are, a buy to let secured loan allows you to take out a loan with a new lender, using your BTL property as security. This keeps your loan and your mortgage completely separate from one another.


Additional options

The search doesn’t end here. You can explore a number of lesser known options for releasing equity on your buy to let property, such as an equity release lifetime mortgage. And there’s always the option of selling your BTL property to generate cash if you’d rather avoid taking on debt. All that matters is finding the right option for your personal financial ambitions and your financial landscape.


Which option is best for you?

With any big financial decision, it’s always best to seek the input of an independent financial adviser. Not only can they talk through the most cost-effective ways to achieve your financial ambitions, they can give you confidence that the decisions you are making are the best fit for your financial circumstances.

Here at Financial Solutions we have a hand-picked team of independent financial advisers that can help you. For an informal discussion about your next steps, get in touch. We are here to help you make sense of your financial journey.


You may also be interested in:

>> How to get tax relief on pension contributions
>> Can you pay off equity release early?
>> Equity release for a second home