The introduction of equity release schemes that could be used on buy-to-let properties changed the market of lifetime mortgages.
Now, if you own a buy-to-let property and want to borrow against it, you may want to learn more about how you can do that. At one point in time, you could only acquire an equity release scheme against a property that was your primary residence. Now, that isn’t the case.
There are several variations of buy-to-let schemes now available including voluntary repayment and lump sum roll-up and in many ways they function just as they would if you were using them on a primary residence. The difference is that now you can use them on a buy-to-let property.
History of the buy-to-let equity release
Buy-to-let equity release schemes are still a fairly new concept, having been introduced ten years ago in 2009. The first version of the plans required that there be a short-hold tenancy agreement in place and that the rental income received cover at least the amount of interest that would be charged by the lender.
There were further changes made in 2013 when interest rates went down quite substantially and new, more flexible options were made available including repayment plans that do not require an income or affordability check.
Given the changes that have taken place, and the overall nature of buy-to-let schemes, we always advise you to reach out to us and get guidance from one of our trusted advisers. We can explain how a buy-to-let scheme might fit in with your needs.
What is a buy-to-let scheme?
A buy-to-let scheme is simply a lifetime mortgage that can be used with a buy-to-let property. A buy-to-let property is defined as one that is let-out under an Assured Shorthold Tenancy Agreement. Basically, it is a lifetime mortgage product secured against a property you own but do not use as your primary residence.
There can be more than one property used with more than one landlord buy-to-let plan. Your property portfolio will be a factor in determining your eligibility for a buy-to-let equity release plan.
How do I qualify for a buy-to-let equity release?
The best tool to use in order to understand which buy-to-let mortgage product suits your personal needs the most appropriately would our free smartER research tool. Similar to other comparison tools on aggregator sites, smartER will understand your personal circumstances/criteria before calculating which products you’re eligible for, their rates, and their maximum releases.
To begin, you have to be between the ages of 55 and 90. If you are borrowing with a partner, this age requirement applies to the youngest borrower.
Your property must be located in either Wales, England, or Scotland and it must have a valuation between £70,000 and £6 million.
There are usually some other factors considered as well, but one of our advisers can review those with you on a case-by-case basis. We can walk you through the qualification process during your free consultation.
How much can I borrow?
As is the case with nearly all lifetime mortgage products, the amount you can borrow will be very specific to your individual circumstances. Those circumstances will include information about you personally, such as your age, as well as about your property portfolio.
Primary Features of a buy-to-let scheme
A buy-to-let equity release scheme takes its primary functionality from a traditional lifetime mortgage product. There are flexible features offered, including the potential to make your plan a voluntary repayment one.
If you choose to make repayments, you are better able to control the balance of your loan. You essentially prevent some, or all, of the interest from being compounded, which limits the future balance that will need to be repaid to the lender. You don’t have to prove that you can afford the repayments to take out a buy-to-let voluntary repayment plan and there is no income check either.
Finally, with buy-to-let schemes you benefit from fixed early repayment charges for the first 8 years of the loan. So, if you choose to pay the loan off within the first 8 years, you know what your penalty will be and if you choose to pay it off after the first 8 years, there is no repayment penalty at all.
Buy-to-let schemes can be incredibly useful to landlords who still want the opportunity to tap into the equity built up in their homes. We are happy to assist you in determining if this is the right type of scheme for your needs and then evaluate how much you can and should borrow. Reach out to us today through any of the contact links provided below.