Most Buy-to-Let Mortgages are not regulated by the Financial Conduct Authority

The information contained within was correct at the time of publication but is subject to change.

21st February 2023

Can I Release Equity From My Buy to Let Property To Purchase More Buy to Let Properties?

This week I was approached by one of my good clients who owned several rental properties. They noticed that one of their properties had increased in value substantially and there was an opportunity to release some money to purchase their next investment property and expand their portfolio. They wanted to know if this was realistic and what hoops would they need to jump through. With rates rising substantially over the last few months, it has made it harder for landlords to borrow the 75% loan-to-value limit that has been the norm for the last few years.

We love doing Buy to Lets as they are different to residential mortgages. Clients generally want to have them on an interest-only basis to maximise the rental income and also want to keep the properties until retirement when they will sell the asset and use the funds as a pension pot.

We’re also seeing a lot more buy-to-lets being purchased through Special Purpose Vehicles (SPV) limited companies. This means the company has been set up specifically to let property. There are several benefits to this and it is definitely worth speaking with your accountant. If you’d like to know more about this, we work closely with The Property Accountant who we would be happy to introduce you to.

Let’s Look at a Case Study of a Recent Enquiry We Received

My client who I have helped for several years came to me to ask if they could release money from their Buy to Let to purchase a new investment property.

I’ve rounded the numbers slightly to make it easier, but essentially they had a mortgage of £115,000 with Santander on their rental property. They had recently had their property valued at £275,000.

They wondered if they could raise money to purchase another investment property.

Having looked at the rental income of £800 per month, we were looking at being able to raise £112,405 with TMW, £110,345 with Birmingham Midshires and £101,857 with Accord to give you three examples.

My client is a higher rate taxpayer which means that they face a higher stress test than basic rate taxpayers.

In Birmingham Midshire’s case, they take the annual rent of £9,600 divided by 145% and with a 5-year fixed rate divided by 6% = £110,344.83.

As my client has a significant income, Accord was willing to look at top slicing.

Top slicing is where the lender will go through your income and expenditure in detail and calculate if they can lend you more.

In this example, Accord was willing to lend up to the 75% mark which is £206,250.

This released £91,250, for my client to use as a deposit on their next investment property.

They were able to source a property for £250,000 and put down the 25% deposit of £62,500. This left them with £28,750 to pay for the solicitors, the stamp duty of £7,500, and enough to furnish the new property ready for the new tenants.

Release Equity From Your Buy-to-Let Property

If you have an investment property with equity that you want to release, there may be options out there for you.

We may be able to use your income to increase the amount that you are able to borrow from the lenders.

You can then use this money to purchase your next investment property and increase your portfolio.

We’d always suggest speaking with your accountant to make sure you are being as tax efficient as possible.

We are happy to talk through all the options with you and find the right lender to arrange the mortgage for you. If you want to review your investment properties, then do give us a call at 01174 520 330. Our initial conversations usually last around 20 minutes. Alternatively, you can email enquiry@lloydwellsmortgages.co.uk and let us know how we can help you.

We will discuss:

· How much you can borrow

· What that will cost

· What fees can you expect

· How Lloyd Wells Mortgages work · What insurances you will need

· What documentation you will need to provide

· Next steps

Your home may be repossessed if you do not keep up with the repayments on your mortgage.