Equity Release, particularly Lifetime Mortgages, can offer financial support for those going through difficult times. Still, it is essential to be aware that these types of mortgages come with significant risks and costs. While equity release or lifetime mortgage schemes may be the right solution for some people, they should always be considered as a last resort. Before committing to Equity Release or Lifetime Mortgages, you must understand exactly what you are signing up for and whether this type of financial instrument is your best route. It is also important to consider alternatives that may be more suitable and less risky than Equity Release or Lifetime Mortgages, such as downsizing, accessing state benefits, and seeking debt advice.

It can sometimes take months to get approved for an Equity Release or Lifetime Mortgage, and you mustn’t feel pressured into making a decision immediately – a specialist advisor will never put pressure on you but instead, allow you to make an informed decision and strongly recommend that your family are involved with the process. By releasing equity from a property, someone going through a divorced can receive a lump sum or regular income, which can be used to cover legal fees, buy out a former partner’s share of the property, or even start a new life.

In terms of Lifetime Mortgages, these types of mortgages allow the borrower to stay in their home while receiving either a lump sum or regular payments. The loan, plus interest, is repaid upon the borrower’s death, entering long-term care or when they sell the property – should they ever wish to downsize. Similarly, Home Reversion plans involve selling a portion or all of the property to a provider, who then pays the homeowner a lump sum or regular payments. Again, the provider only receives their monies once the property is sold, either after the homeowner passes away or goes into long-term care. We do not recommend Home Reversion plans simply because you lose home ownership as are selling your property at a reduced market value to reflect the buyer’s risk and ultimately become a tenant in your own home.

Equity Release and Lifetime Mortgages can be particularly helpful when a couple is separating, as they can divide assets without having to sell the property outright. It’s important to note that these options may not be suitable for everyone and should be carefully considered before making a decision. Seeking advice from a financial adviser or mortgage broker who is independent and carries the relevant qualifications and experience is essential to understanding the full scope of these options.

In conclusion, Equity Release and Lifetime Mortgages can offer a lifeline for those going through a divorce. They provide a way to access funds that can be used to cover costs associated with legal fees or property buyouts, learn more about how much you can receive with our equity release LTV Calculator. However, weighing the risks and considering the long-term implications before making any financial decisions is essential.

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People commonly utilise equity release for retirement, but buy-to-let landlords can also use it for buy-to-let properties.

Is an equity release mortgage available on a buy-to-let property?

As a landlord, you may have contemplated selling your buy-to-let property to raise income for retirement. However, this may result in capital gains tax. Instead, consider acquiring the funds through equity release.

Although do bear in mind that options may be restricted because most providers will refuse landlords outright if the property you are releasing funds is a buy to let. It is, nevertheless, not impossible. A small number of providers cater to investment property owners by adhering to tight requirements instead of retirement loan organisations that only engage with residential homeowners.

Your rental income will be unaffected if you take a tax-free lump payment from your buy-to-let property. In addition, if you own numerous buy-to-let properties, you may be able to release cash from all.

To be eligible for equity release services, you must be over the age of 55. Provided you fulfill the remaining provider’s requirements, the money you choose to release can be utilised for about every lawful reason, from retirement to pay for a holiday.

How much equity may be retrieved from a buy-to-let property?

Up to 44% of its worth. This is the maximum amount you may release from your buy-to-let property with a lifetime mortgage. The amount, however, will be determined by the following factors:

1. The worth of your buy-to-let property
2. How much equity has been built up
3. Your age

A property with a high value and plenty of equity will allow you to release more cash than a property with a low value and little equity. However, age is a significant factor in a provider’s calculation. Older borrowers may typically release more equity than younger borrowers, and the maximum loan-to-value ratio is usually allocated for them.

To qualify for the buy-to-let equivalent of a lifetime mortgage, you must fulfil the following requirements:

1. You must be 55 or older
2. You must have adequate equity in your buy-to-let
3. You must have tenants in your BTL
4. You must have an assured tenancy agreement in place.

What is the process of obtaining a buy-to-let equity release mortgage?

If you use an equity release service, your provider will apply a fee on your buy-to-let property in exchange for allowing you to release some of the cash you’ve built up, either in monthly installments or as a lump payment.

Fortunately, there are no required monthly payments during the loan period. It is possible for the interest to be rolled up and added to the debt at the end of the agreement, occurring when the last remaining borrower enters long-term care or passes away. There are, however, products available if you want to make capital payments before the end of the agreement.

If the property’s value falls, leaving the provider with a debt, fortunately, your beneficiaries will not be saddled with the payment. This is due to the Equity Release Council’s called the Negative Equity Guarantee.

Releasing Home Equity to Invest in a Buy-to-Let Property?

If you have enough equity in your main residence, you may be able to release enough for a deposit on an investment property.

Remortgaging is the simplest way to unlock equity from your home, and many property investors do so to fund their future investments. If your home isn’t due for a remortgage for a few years and you still have Early Repayment Charges (ERCs) in place, remortgaging early will be costly; therefore, you could consider taking out a further advance. A further advance is when you borrow more money from your present lender, generally at a higher interest rate than your current mortgage, and use it as your deposit. When the time comes to remortgage your house, you may use the equity to pay off the additional advance.

Compared to saving enough money month after month, this is a significantly faster approach for many people to obtain a deposit for an investment property. A 15-25% deposit is required for buy-to-let property purchases; the more significant the deposit, the better the mortgage rates you’ll have access to.

Thinking of Using Conran Mortgages?

If you’re thinking of releasing equity, it’s a good idea to get expert guidance, as releasing equity from a property isn’t something you should do lightly. You’ll need to weigh all options and, if equity release is the greatest choice, make sure you get the best price on the market.

A broker will not only go through all the alternatives available to you in detail but will also explore the whole market for the best product for you, lead you through the process, and assist you with any paperwork along the way.

Call Conran Mortgages at 0800 689 3173

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