Learn more about Buy-to-let Equity Release
It is important to understand the difference between Equity Release – an industry term that refers to a specific type of product; lifetime mortgages or home reversion plans, and releasing equity, which typically references a remortgaging of a property.
To learn more about releasing equity with buy-to-let properties please refer to our other article Remortgaging a Buy-to-Let Property. For information regarding lifetime mortgages, read on!
Can I get a lifetime mortgage with a buy-to-let property?
Will my property be protected in the same way as equity release on a residential home?
What happens to my tenants?
How does the equity release work with my buy-to-let mortgage?
Unlike equity release on a residential mortgage, a buy-to-let lifetime mortgage releases you from the burden of monthly mortgage payments. You may end up with a smaller lump sum than the residential equivalent, but can now rely on regular additional income throughout your retirement.
Simon owns a second property valued at £280,000 that currently rents out for £1,050 per month. His buy-to-let mortgage is for £135,000 and costs him £573.75 per month.
He obtains a lifetime mortgage for £154,000 and pays back his buy-to-let mortgage in full. After the legal fees and other costs have been taken into account, Simon releases immediate cash of £18,200 and no longer has to make monthly payments to the mortgage company.
Other than regular agency fees and maintenance, Simon is free to enjoy the £1,050 income per month.
How much money can I release from my let property?
The LTV (loan to value) ratio of a lifetime mortgage increase with your age. While it isn’t always pleasant to think about, the equity release provider is more willing to lend under the terms of a lifetime mortgage the shorter your expected life span – those who are older or have ill health will receive better deals than younger, healthier homeowners.
Buy-to-let lifetime mortgages are generally stricter with their terms than residential equivalents and you will be offered slightly smaller loans than you would on residential terms.
The rates will depend on the specific lender but will range between 9% LTV (at 55 and healthy) to 55% or more for people later on in life or those with poorer health.
Remember, you will have to pay off your current buy-to-let mortgage in full, so if the LTV of that interest-only loan is greater than the best deal you can find, a lifetime mortgage may not be an option for you.
At The Mortgage Hut, we are experts with remortgaging and equity release and will work with you to get the perfect deal to suit. Our network of lenders is vast and includes many providers who work in the buy-to-let and equity release sector. Contact us today to see what kind of LTV deals we can get for you.
What other options are there to get equity from my buy-to-let property?
Equity release with The Mortgage Hut
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