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How to release equity from Buy to Let in Birmingham

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There is a sense of economic unease triggered by the rising cost of living, the burgeoning cost of house prices in the UK, and worries about an upcoming recession. 

Due to these changes, it is more difficult than ever to get a loan or mortgage to buy-to-let property. Consequently, many prospective property buyers are now finding alternative ways to finance their property purchases, particularly through crowdfunding. 

It is here that releasing equity for buy to let comes into play. It’s a way to cash out your property. The most common question today is if release equity from buy-to-let can be used to buy buy-to-let properties. 

Yes, they can. On that note, let’s get started. 

Key Takeaways
With any form of borrowing, equity release should not be taken lightly. When you work with a professional mortgage broker, an equity release can effectively finance a buy-to-let property purchase. An equity release loan is tax-free for homeowners over 55 to access the capital they have built up while paying off their mortgages.
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A Guide to Buy-To-Let Equity Release

The process of taking out an equity release mortgage on a buy-to-let property is more challenging than it is on a residential property. 

The main reason is that many equity-release mortgage providers do not accept applications from clients who wish to free up equity from an existing buy-to-let investment property. The truth is that only a very small percentage of providers will even consider applying for properties of this type. 

For this reason, it’s generally recommended that you use a professional broker if you’re attempting to get the best deal possible. 

Using this method, they can determine which course of action is most suitable for your circumstances, offer expert advice, and ensure that releasing equity from buy to let is a smart financial decision for you.

Furthermore, when raising capital from an existing buy-to-let property, releasing equity can be a much more appealing option than simply selling the property to raise funds. 

As a result, selling is usually associated with an increase in capital gains tax, which will substantially impact your actual money from the sale.   

Equity Release: How to Fund a Buy-To-Let Purchase?

Using the equity release for buy-to-let in your residential property as a source of funding to remortgage a buy-to-let-to-release equity is a relatively simple process, especially if you use a specialist mortgage broker to complete the process for you. 

Regardless of the type of equity release scheme you choose, there are a few criteria you’ll need to meet. 

Age 55 or older is required to apply for equity release (or 65 if you wish to apply for home reversion). 

Here are a few ways to fund buy-to-let property: 

  • Save. It’s obvious, and you can avoid paying for lifestyle inflation over the long run by putting your cash aside and investing it.
  • Remortgage. By borrowing against the property’s new value, you can withdraw the equity and borrow against it tax-free if the property’s value has increased because you have improved it or the market has increased. 
  • Sell. Selling your old property may cost you hefty capital gains taxes if it doesn’t meet your needs anymore.
  • Pension. A new rule introduced in April this year allows over-55s to withdraw part or all of their pension pots and use them however they choose, including buying buy-to-let properties. 
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Pros & Cons of Equity Release: Is It a Good Idea?

The benefit of buying to let equity release is that you can have a retirement income from your home, but it has some pitfalls. Here are some pros and cons that will help you decide whether it is the right option.

Get tax-free cash

With the help of a lifetime mortgage, your home’s equity can be released as a lump sum cash payment or a series of flexible payments for your life while remaining the full owner of that home.

In essence, you can use this money in any way you see fit, including paying off debt, supplementing your income, improving your home, and helping out your family.

No loan will exceed your house’s value.

It is a guarantee that lifetime mortgages offered by the Equity Release Council members will not result in negative equity under any circumstances. This prevents you from incurring more debt than your home is worth. 

You can rent out your property

Equity release is one of the easiest ways to voluntarily release equity in your home. While you can continue to live in the house and rent it out, you can also focus on fixing or improving it so you can retire. 

Cons of equity release

Interest will increase your debt

One of the key disadvantages of a lifetime mortgage is that the interest can be rolled up. 

Early exit fees might apply

A loan early repayment charge may apply depending on how early you repay it.

Conclusion 

At Pluxa Property, our property experts are on hand to ensure that releasing equity from a buy-to-let investment property is safe and handled with the utmost professionalism.

Making smart property investments can be made easier when you work with Pluxa Property and get the best deals on properties.

We are a reputable sourcing and consulting company that helps you invest in high-quality properties with high returns.

FAQs

Why is it strongly recommended to take a mortgage in the UK?

Investing in the UK is an excellent idea because of the low-interest rates offered to investors. As a result, mortgages help people save money and invest in the property they want.

Can I release equity in my house to buy another?

It is common practice for landlords to remortgage one property to release equity for purchasing another.

What happens in the UK if I can’t pay the mortgage?

The arrears must be repaid within the mortgage term. If you violate the terms of the arrangement, your lender could apply to the court to have you evicted if you do not comply.

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