Updated: December 09, 2021

A Guide to Buy-to-Let Equity Release Mortgages

Looking to take equity release on a buy-to-let property? Our detailed guide will show you exactly how to do it.

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Pete Mugleston

Author: Pete Mugleston - Mortgage Expert

Updated: December 09, 2021

Equity release can be an effective tool, which allows you to access capital from your current rental property as a tax-free loan. But if you still have a buy-to-let (BTL) mortgage outstanding, it can be much more difficult, with just a handful of lenders able to help.

By following this guide you’ll have a far better understanding of the best way to find the right lenders and what you need to consider before choosing the best equity release scheme for your circumstances.

How does buy-to-let equity release work?

The equity release process for a buy-to-let is similar to that of a residential property: you need to pay off any outstanding mortgage with the funds released, before receiving the remaining equity into your account.

An admin fee will be charged by the lender to release the equity and you can opt to receive the cash either as a lump sum or in monthly payment instalments.

Throughout the equity release loan term there are no monthly payments, although you can select a product that will give the option to pay back the loan.

In most cases you can allow the interest and debt to accumulate with an agreement for it to be repaid in full at the end of the term – which is often when the borrower either passes away or enters long-term care.

And if the property declines in value throughout the loan term, your beneficiaries won’t be hit with the bill for any accrued debt thanks to the Equity Release Council’s Negative Equity Guarantee.

What are the benefits?

Selling buy-to-let property to raise funds for retirement runs the risk of incurring capital gains tax. If you release the funds in your property via equity release instead, you can take it out as a tax-free lump sum, your rental income will remain intact, and the cash released can be used for further investments or for retirement needs.

Other benefits of BTL equity release include the fact that there are no monthly payment options and the ability to ring fence a portion of the property for inheritance purposes. There’s also the obvious benefit of the released equity being tax-free.

How much can you take out?

You may release up to 19% of your home’s value for buy-to-let properties at age 55 and this will increase by 5% each year until you reach 44% at the age of 80.

What products are available?

For buy-to-let property owners, the equity release schemes available are similar to the terms of a lifetime mortgage. However, while these products are essentially the same thing and act like regular home loans, they are labelled differently as they don’t meet the Financial Conduct Authority’s (FCA) definition.

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How to release equity from a BTL property

By following the steps below before applying you can make the application process much more straightforward.

Find out if you’re eligible

Equity release providers will use the following eligibility criteria to assess your application.

You must…

Bullet Tick Be 55 or older
Bullet Tick Have sufficient equity in your buy to let 
Bullet Tick Have tenants in your BTL
Bullet Tick Have an assured tenancy agreement 

The amount of equity you need to hold may vary depending on factors like your age and the overall strength of your application. A broker can help you assess whether you have enough equity and guide you to your most favourable offer.

Prepare your paperwork

You’ll need to have the right paperwork in order for your application process to go smoothly. You should prepare three months worth of bank statements, proof of address and income.

Providers will want to see the Assured Shorthold Tenancy Agreement (AST) that is used to let out the property along with information about your property portfolio.

Speak to a buy-to-let equity release broker

BTL equity release providers can be hard to find. In fact, there’s only one in the whole of the UK who really specialises in this – that’s why you’ll need to engage a professional broker who understands investment property mortgages and what criteria you’ll need to meet to access this type of product.

A specialist broker will already have the necessary qualifications and years of experience in accessing equity release; if you only have one shot at this, it’s best to have your application as best prepared as you can beforehand.

Call us on 0808 189 0463 or make an enquiry and we’ll connect you to a broker who can help.

Other alternatives to consider

If you are under 55 you may be wondering if there’s still a way you can release equity in your buy to let.

Equity release is specifically geared towards those approaching or in retirement age, but there are plenty of viable alternative options out there, including….

Remortgaging

If you hold enough equity, most lenders will allow you to refinance and borrow up to 75% of the property’s value. You can find out more in our guide to buy-to-let remortgages.

Secured loans

A secured loan offers a viable alternative for those who want to use their property as collateral, but can’t remortgage or take equity release. Lenders often offer generous borrowing upper limits, but you must be able to prove your affordability for making repayments alongside your mortgage commitments.

Further advance

You may be able to secure financing through your buy-to-let property by getting a further advance on your existing mortgage. You would need to undergo affordability and credit checks again with your existing lender to determine your eligibility, but they may be happy to accommodate if you tick the right boxes.

Equity release on your home

If you own your own home as well as a BTL, you may want to consider getting equity release for your residential property. This may help to secure more favourable terms and release more equity, but some owners may feel less comfortable with the idea of using their primary residence as collateral.

Get matched with an equity release advisor today

If you’re thinking about getting an equity release for your buy-to-let mortgage, it’s best to get help from a mortgage broker.

While there are few providers who offer this service, we can help match you with an enquiry release advisor who has expert knowledge of the buy-to-let industry today so you don’t needlessly overpay on interest. Get started by contacting our team on 0808 189 0463 or make an enquiry.

We’re here to facilitate property ownership and make the process easy for you – we don’t charge a fee for making the connection.

Ask us a question

We can help! We know everyone's circumstances are different, that's why we work with mortgage brokers who are experts in Buy-To-Let mortgages. Ask us a question and we'll get the best expert to help.

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Pete Mugleston

Pete Mugleston

Mortgage Expert

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!

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 that 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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