It is important to understand the distinction between a formal "Equity Release" product and the general process of "releasing equity" from a property. The former is a specific financial product designed for residential homes, while the latter simply means you're accessing the value built up in your property.
How to Release Equity from a Buy-to-Let Property
Landlords often have more options available to them than those with only a single residential home. Here are some of the most common ways to release equity from a buy-to-let property:
Remortgage:
A standard remortgage could be all you need to release equity. If you have a significant amount of equity in the property (its market value minus the outstanding mortgage), you might be able to remortgage to a larger loan-to-value (LTV) ratio to free up a lump sum. Alternatively, you could refinance with a similar LTV but at a better interest rate to lower your monthly costs.
As a landlord, you can use the regular rental income to show a lender you can afford the monthly mortgage payments. Since the property has been part of your portfolio for some time, your accounts can demonstrate how the property essentially pays for itself, which lenders are happy to consider when assessing your affordability. Some lenders will even allow buy-to-let mortgages up to a much older age, such as 105.
Buy-to-let further advance:
This is a straightforward process where you go to your current mortgage lender and ask them to increase the size of your mortgage to free up cash. While it ties you to your existing lender's rates, it can be a simple way to release a significant amount of money.
Second charge:
A second charge is similar to a further advance but is a separate loan secured against the property's equity without changing your main mortgage.
Sell the property:
For landlords, selling a property is often a simpler and less emotional option than it is for a residential homeowner. If the market value of the property is high, you can pay off the current buy-to-let mortgage and keep any additional cash. Of course, you will lose the income from the property, but you'll also be free from the administration and maintenance responsibilities.
The Mortgage Hut are experts in remortgaging and will work with you to find the perfect solution. We have a vast network of lenders who work in the buy-to-let sector. Contact us today to explore your options.