I’m a landlord who needs cash to fund some home improvements.
I own a buy-to-let property that has no sentimental value to me. I’d also like to increase my monthly income, so would like to avoid remortgaging.
Is it possible to get equity release on my buy-to-let property?
There are equity release options available from specialist lender Retirement Advantage
Dean Mirfin, of later life lending advisers Key Retirement, replies: Over the past 10 years, we have seen both the equity release market and the buy-to-let market evolve significantly.
An increasing number of people are looking to residential property to fund their retirement and it is now possible to use equity release on a buy-to-let investment.
However, you need to consider whether you should be using equity release or whether selling the property might make more financial sense.
Not just in terms of either transaction but also you need to understand the tax implications of the potential options.
Another consideration is, in the longer term owning a buy-to-let property will still need more of a time and resource commitment than other types of investment, which may well become more difficult as you age.
Key Retirement’s Dean Mirfin recommends speaking to a specialist broker when considering equity release on a buy-to-let
Should you decide that equity release is the right option then the good news is that there are options available to you from specialist lender Retirement Advantage. It offers a range of different products specifically available through specialist advisers.
Depending on your situation, this might enable you to access some of the equity tied up in the buy-to-let property to spend on other things or allow you to repay an existing buy-to-let mortgage while still benefit from the ongoing rental income.
It is up to you how you use the money you release.
Not all properties are suitable for acceptance by Retirement Advantage however. For example, some types of flats are not acceptable – those above a shop or properties below a certain value.
However, you are likely to be aware of this if you took out a mortgage originally to buy the property, as you will have found that buy-to-let lenders also have similarly stringent criteria.
Assuming the property type meets the lender’s criteria, to qualify for the Retirement Advantage products, the property should be let out with an assured shorthold tenancy in place.
The same basic criteria that apply to releasing equity from your main residence also hold true for using equity release on buy-to-let. How much you can borrow depends on your age and the property value.
To access the Retirement Advantage range, the youngest borrower needs to be aged 55 or over with a maximum age at outset of 90.
The amount you can raise is expressed as a percentage of the property value and is determined by age – nine per cent at age 55 rising to 34 per cent at age 80. You can release between £10,000 and £750,000 depending on these criteria.
Retirement Advantage offers two basic product types – the Over 55 Buy-to-Let Lifestyle and the Over 55 Buy-to-Let Voluntary Select.
FIND OUT ABOUT EQUITY RELEASE
The lifestyle option allows you to borrow a one off lump sum and then the interest rolls up for the life of the mortgage. The voluntary select option allows you to repay up to 10 per cent of the loan each year penalty free.
The good news is that if you want to make regular payments there is no affordability assessment or rental income requirements as these repayments are deemed as voluntary.
As mentioned above, some landlords find it increasingly more taxing to maintain and rent out the property as they age. These products take into account this issue and from year nine, you are able to repay the entire loan penalty free which means that should you – for example – want to sell the property, this is possible.
In earlier years the penalty for early repayment was on a sliding scale with a maximum amount of 5 per cent of the initial loan.
So to reiterate, equity release is entirely possible on a buy-to-let property but there are many variables to take into account so I would recommend that you speak to a specialist broker and tax adviser who can take the specific details of your situation and help you to make the choices which will best suit you.