Equity Release Lifeline For Buy To Let Landlords

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A new mortgage range allows landlords to unlock the value of their buy to let investments without triggering a tax bill.

Equity release mortgages for buy to lets is a new idea on the British market, but lender Retirement Advantage has just released three deals for landlords and second home owners.

Property investors have three choices of loan:

  • Cashing in on the property value and paying nothing back, with interest rolling up until the loan ends
  • Taking cash and opting to pay some or all of the interest
  • Taking money and paying up to 10% of the loan amount off each year

No capital gains tax

The firm – just acquired by financial giant Canada Life for an undisclosed price – is promoting the mortgages as a way for landlords to release cash from their investments without having to pay capital gains tax.

For landlords, equity release is no different from remortgaging a property.

Providing the funds raised are spent on business expenses, the interest can be offset against rental income.

Money can be clawed back from a property as long as the amount does not exceed the landlord’s initial investment as a legitimate business cost and the property business can offset the interest repayments.

But if the money exceeds the owner’s initial investment and goes towards personal spending, tax rules will not allow any interest deduction when calculating rental profit and loss each year.

Innovative solution

The company will consider equity release against property portfolios in England, Scotland and Wales that are worth between £70,000 and £6 million. Loans against higher value properties may be considered.

Managing director Tom Evans said: “The buy-to-let product range is a further signal of our intent to deliver innovative new solutions for customers and advisers alike.”

Similar lending rules also apply to second homes, but the property must be for the sole occupancy of the owner and occupied by the owner for at least four weeks a year.

Borrowers mainly fund home improvements and clear debts with any cash from equity release, added Evans.

1 thought on “Equity Release Lifeline For Buy To Let Landlords”

  1. We are currently unencumbered UK residents and property owners.

    We own two separate titles in England and wish to release some equity from one title as a buy to let.

    It is currently valued at £918000 according to zoopla.

    The rental potential is between £2100-£2600 per month.

    We need a tax efficient loan for our expat business proposals and we would like an interest only repayment option and be allowed to reduce the loan periodically with annual lump sum capital repayments.

    Our current total household income from secure employment is £70k plus.

    Reply

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