Equity release available on buy-to-let properties

Property equity a growing retirement asset for the over 55s 

More people in the UK own more than one property than ever before; by 2017, it was estimated that one in ten adults had more than one source of property wealth, with that figure going up by nearly a third in the decade up to 2014¹. Much of that wealth is owned by those who are retired or approaching retirement, with the amount of property equity held by the over 55s now being calculated as £382 billion².

Buy-to-let equity release mortgages 

If you’re one of many retired people or those approaching retirement who own a buy-to-let property, the good news is that you can now release some of the value of that property to help you fulfil your later-life dreams, whether that’s going on a holiday of a lifetime, making home improvements or helping friends or family. How much you can borrow will depend upon your circumstances, which will include your age and the value of your property, with loans ranging from £10,000 to a maximum of £750,000.

There are no affordability checks and you don’t have to give any proof of income. You won’t need to make any repayments, meaning you can keep the full rental income of your property. 

Equity Release Council compliant 

The buy-to-let lifetime mortgages offered by Canada Life (October 2019) comply with the relevant Equity Release Council standards, including their No Negative Equity Guarantee, fixed interest rates and independent legal advice. However, as they are offered only for properties other than your main residence, the following standards do not apply: 

• You do not have a right to remain in the property for life, or until you go into care 
• You do not have a right to move to a suitable alternative property 

The different types of buy-to-let equity release mortgages

People become landlords for different reasons, so there are different buy-to-let equity release schemes to match these different circumstances:

• Buy-to-let lifetime mortgages*: This covers most mortgages on properties that are let out; you would qualify for one of these loans if you have never lived in your rental property, or are a portfolio or professional landlord. 
• Consumer buy-to-let lifetime mortgages*: If you originally lived in your property and so have become a landlord slightly by accident (maybe you have moved in with a new partner or a family member), you would qualify for a ​‘consumer buy-to-let’ loan.

Conditions for buy-to-let equity release mortgages 

To be eligible to qualify for a buy-to-let equity release scheme, you will have to fulfil the following criteria: 

• You must own the property 
• You must be a UK resident 
• You must be aged between 55 and 90 
• The property must be in England, Scotland or Wales 
• The property must not be lived in by you or members of your family 
• The property must be let out under an Assured Shorthold Tenancy 

Things to think about 

Before taking out a buy-to-let equity release scheme, there are a number of things to consider, including whether it might impact on your eligibility for means-tested state benefits and your tax position.

A buy-to-let equity release loan it is a long-term commitment and is not normally designed to be paid back during your lifetime. This will therefore affect the amount of money you are able to leave to your loved ones and potentially the amount of Inheritance Tax they are liable to pay. 

As with any equity release scheme for the over 55s, there is a lot to consider before deciding to release equity on your rental property. Our expert equity release advisers will be happy to talk you through the pros and the cons and to guide you as to whether a buy-to-let equity release scheme could be an appropriate solution for your circumstances. 

SOURCES

1 The Resolution Foundation, 2017

2 Canada Life, 2019 

* Please note: We can advise and arrange Business Buy to Let Lifetime Mortgages (BBTL) and Consumer Buy to Lets Lifetime Mortgages (CBTL). Of the two, only Consumer Buy to Lets Lifetime Mortgages are regulated by the FCA.