Remortgage a buy to let to release equity

Remortgaging a buy to let mortgage to release equity is very much possible and common in the UK. Whether you can remortgage your buy to let mortgage to release equity will depend on how much equity you have in the property and the current mortgage loan to value rates buy to let mortgage lenders may be willing to offer on buy to let remortgages.

If you are considering remortgaging your buy to let mortgage to release equity then you may want to speak to an independent whole of market buy to let mortgage broker

An example of remortgaging a buy to let mortgage to release equity

If you remortgage a buy to let to release equity you essentially get a new mortgage that is bigger than the buy to let mortgage balance you currently owe on your current buy to let mortgage plus the amount which you want to borrow. The old buy to let mortgage is paid off and the remaining amount which you want to borrow is paid into your account.

If you have a property worth £400k and you owe £100k but want to borrow £150k You will remortgage your buy to let mortgage and release equity by taking a new buy to let mortgage for £250k.

This will give you £100k to settle your current mortgage and the £150k you wanted to borrow.

Differentiating between “equity release” and releasing equity:

Most borrowers may use the two terms interchangeably but in fact, they are two completely different things.

Equity release products are products made specifically for older borrowers (usually those over 55) which allows them to release equity from their home and not have to repay the mortgage usually till they die or move into a care home. Equity release products include home reversion plans and lifetime mortgages.

Releasing equity, on the other hand, is the process of releasing equity which has been accumulated in an asset through repayments, appreciation in value or through the initial deposit. This equity is essentially released by borrowing it back to you or providing you further borrowing which you will usually have to pay back over an agreed term.

Can you remortgage a buy to let mortgage to release equity with bad credit?

If you want to remortgage a buy to let mortgage to release equity with bad credit this may be difficult as mortgage lenders may usually want to lend to borrowers who have a good credit score and have shown a good repayment history on all their previous credit accounts.

There are however some residential mortgage lenders who may be willing to offer you a buy to let remortgage to release equity based on the type of bad credit you have.

If it was a CCJ which was satisfied and is a certain age then some mortgage lenders may be willing to lend. Other mortgage lenders may lend if the CCJ didn’t surpass a certain amount.

When looking to get a mortgage with bad credit the requirements from different mortgage lenders will differ and a bad credit mortgage broker may be able to assist you in remortgaging a buy to let mortgage to release equity.

Bad credit could include:

A CCJ

An IVA

A debt management plan

A default

A bankruptcy

A home reposession

Can you remortgage from a buy to let mortgage to release equity if you are self-employed?

Mortgage lenders often scrutinize self-employed borrowers to ensure that they have reliable and stable incomes with little gaps in their employment which cannot be explained.

If you are a Self-employed borrower you will have to provide documents with at least 3 years worth of accounts before most mortgage lenders may consider you.

There may however be some mortgage lenders who are willing to consider a self-employed borrower with less than 3 years worth of accounts but they will usually want to see at least 12.

When looking to remortgage a buy to let mortgage to release equity as a self-employed borrower you may need to provide the below documents:

SA302 tax calculation form

P60 tax return form

Your CV

3 months worth of bank statements.

You may want to use a self-employed mortgage broker when considering remortgaging a buy to let mortgage to release equity

What are the mortgage affordability requirements when remortgaging a buy to let mortgage to release equity?

When remortgaging a buy to let property to release equity you may need to show the new mortgage lender you have enough monthly disposable income and can comfortably cover the monthly mortgage repayments which may likely increase if you don’t also increase the term of your buy to let mortgage when you remortgage to release equity.

Some mortgage lenders may also accept benefits whilst some will not accept benefits. If benefits play a significant stake in your income then you will want to find a mortgage lender who accepts a huger percentile of benefits as income as mortgage lenders all have different percentile for which they accept benefits and other supplementary income.

When considering remortgaging from a buy to let to a residential mortgage supplementary income could include:

Pension income

Investment Income

Overseas earned income

Maintenance Payments

Rental Income

Bursary

Stipend

The methods of remortgaging a buy to let to release equity

There are several methods you could remortgage your buy to let mortgage to release equity except remortgaging to another buy to let mortgage.

We will discuss a few of them below.

sell the buy to let property

One of the simplest ways to release equity from a buy to let property would be to sell the buy to let property and downsize to a smaller one. Be sure to factor in any tax obligations and other costs involved with selling your buy to let property to release equity.

Get a secured charge secured loan

You may be able to release equity on your buy to let property by getting a second charge secured loan on your property with the equity you have on the property. You may need to seek permission from your first charge mortgage lender to do this. This could be a good option if your current buy to let mortgage lender will not remortgage to release equity.

Remortgage to a new buy to let mortgage lender

You may also simply remortgage to a new buy to let mortgage lender to release equity if your current mortgage lender does not want to lend to you.

Remortgage to an equity release product

If ou meet the eligiblity requirements for an equity release product then yu could remortgage your current buy to let mortgage to a lifetime mortgage ( an equity release product).

To be eligible for an equity release product you will usuallyneed to be atleast 55 years of age.

The amount of equity you may be able to release from your buy to let mortgage with an equity release product will be based arod your age and circumstances.

The older you are and the more likely you are to die you will find that more equity release lenders will be willing to release a greater amount of equity to you.

You may not find too many equity release procudes who are happy to reortgage you from a buy to let product to an equity release product. You may want to consider usiing a specialist mortgage broker to assist you.

If you do find a mortgage lender wiling to release equity from your buy to let mortgage with an equity release product the criteria such as loan to value rates may be much stricter.

  • With an equity release product you qill get to live in the property till you die or move into long term care at a care home.

  • You can choose to make monthly mortgage repayments which are made up ofonly interest or youcould choose to roll up the interestahwich will be repaid when you move into a care home or die.

  • The balance which is advanced to you can be given in one large sum or regular payments. You may want to consider which is the best tax efficent way to release equity by contacting a tax advisor.

  • The balance you have borrowed plus any interest will be repaid when you die or move into a care home by the equity release procider selling the home and repaying whatever is left to your family.

  • You can ringfence the equity in yurhoe and pass it to your family or friends in your will

  • No negative gurantees are now commonwith equity rleease providers who are memebrs of the equity release members council. With a no negative guarantee the equity release provider guarantees that you wont owe more than your property is worth.

John Bate

John has 22 years of experience in financial services. This spans across financial research, financial services (As a qualified mortgage broker and underwriter), financial trading and sales at global investment banks. While working as a publishing research analyst, he covered European bank credit and advised institutional clients on investment strategies at both JP Morgan and Societe Generale. John has passed all three levels of the CFA (Chartered Financial Analyst) programme.