Buy to Let Equity Release Schemes
Equity release plans traditionally lend on a homeowners main residence. However, there are now additional plans available which enable a release of equity, where ownership is also present on qualifying second homes. Retirement Advantage have re-introduced a new range of Buy-to-Let Equity Release schemes, to assist the over 55’s develop their BTL portfolio’s & ultimately benefit their retirement planning.
Based on their own standard product ranges, we now have equity release lenders offering a range of options from lump sum roll-up, drawdown plans, voluntary payment or interest-only lifetime mortgages, all on a buy-to-let basis. This particular lender is currently Retirement Advantage. These Landlord Equity Release Options from Retirement Advantage now complement the second home equity release sector.
Background to Buy-To-Let Equity ReleaseEquity release on a buy-to-let property has been available via lifetime mortgages on & off since 2009. The first company to design such products was NewLife Mortgages. The New Life Landlord Loan required a short-hold tenancy agreement in place and rental income usually had to at least cover the interest charged by the lender (NewLife Mortgages have since been taken over by Legal & General Home Finance). The uptake of these plans was minimal due to the period of launch being just after the credit crunch. Interest rates were high on these products at the time, many buy-to-let investors had their fingers burned as lenders reigned in their lending criteria, even withdrawing residential buy-to-let mortgages.
However, since 2013, when the last Buy-To-Let lifetime mortgage from NewLife was withdrawn, many factors have conspired to force a rethink in the potential of Landlord Equity Release Schemes. Since then, interest rates have fallen significantly, flexible equity release schemes have been designed and repayment options introduced.
Additionally, landlords themselves have been further hit with additional stamp duty levies on second home purchases, reductions in tax relief that can be claimed on interest paying BTL mortgages. Then we have the interest-only time bomb effect, also applicable to the rental sector where lenders have introduced higher stress testing resulting in many older BTL mortgages not being extended at term. Investors are now looking for alternative sources of funding enabling them to keep their investment & associated income.
Definition of a Buy-To-Let Equity ReleaseRetirement Advantage define a buy-to-let property as one that is not occupied by the owner and must be let-out under a contract being an Assured Shorthold Tenancy Agreement. Multiple properties can be used with more than one Landlord Buy-To-Let plan.
What are the Qualification Rules for Buy-To-Let Equity Release Schemes?To qualify for the range of Retirement Advantage Landlord Options plans the owners of a buy-to-let property must have attained a minimum age of 55, but be no older than 90 years of age. This applies to the youngest property owner should it be in joint names. The minimum property value to qualify for a Landlord scheme start from £70,000 and can go upto a maximum of £6 million and must be located in either England, Scotland or Wales. The amount that can be borrowed is based on Retirement Advantage’s standard loan-to-value (LTV) criteria.
However, for their Buy-to-Let Landlord products, Retirement Advantage have reduced the standard loan-to-value percentage due to the perceived risks involved. Therefore, a homeowner age 65 where the standard LTV is normally over 26%, their Buy to Let Equity Release plans will only lend a reduced maximum of 19% of the property value for buy-to-let equity release calculation purposes.
Key Features of Buy-to-Let Landlord MortgagesLandlord equity release providers use their core lifetime mortgage range to launch their Buy-To-Let plans. These come in a range of flexible features including repayment options such as voluntary payment plans where the interest charged can be managed, thus controlling the future balance for a variety of reasons. There are repayment options whereby the future balance can be either allowed to roll-up, or controlled by way of repayments; be it voluntary repayments or interest-only. Landlord schemes have the benefit of fixed early repayment charges of 8 years, with no penalty remaining thereafter.
Further Information on Buy-to-Let Equity Release SchemesFor greater analysis surrounding the launch of Buy-to-Let equity release in 2017, a detailed article can be found in our news section here.
Our complete range of equity release deals are available by visiting our equity release comparison tables, where you’ll find further information on Retirement Advantage products.
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These are Buy To Let lifetime mortgages. To understand the features & risks request a Key Facts Illustration.