How landlords can release cash from their properties with new equity release schemes

Buy-to-let investors who find themselves strapped for cash will soon be able to free up equity without having to sell any of their rental properties.

This is thanks to a new suite of equity release options soon to be launched by pensions company Retirement Advantage, which will be aimed specifically at landlords.

What is an equity release scheme?

Equity release schemes are a type of loan that allow those over the age of 55 to access money that is tied up in property.

There are two types of equity release schemes currently on the market: lifetime mortgages, and home reversion. As the name suggests, lifetime mortgages involve taking out another mortgage on the property, to be paid back after the owner’s death. Home reversion involves selling part or all of your property to a reversion provider, but then being allowed to live there rent free until you die or move into long-term care.

Usually, these schemes are only available for the property the owner lives in, and Retirement Advantage will be the only providers of such schemes for landlords. They’re also planning to offer an equity release scheme for those who own more than one property but don’t rent the others out.

Equity release schemes for landlords from Retirement Advantage

In the range being offered to landlords by Retirement Advantage, you can pay off the full amount at the end of loan, pay the interest on the loan during your lifetime, or pay off up to 10 per cent a year (with no early repayment charge).

The interest rates are between 6.07 per cent and 6.45 per cent, depending on which option you choose.

You also have the option to take out loans on more than one property, so long as each property is worth between £70,000 and £6,000,000. The firm has said that more expensive properties will be reviewed on a case-by-case basis.

How will equity release affect tenants?

As well as not having to sell their properties, landlords won’t be forced to evict tenants in order to take advantage of the equity release schemes provided by Retirement Advantage.

Tenants will also not be required to end their tenancy early so that Retirement Advantage can claim the property once the landlord dies.

Retirement Advantage managing director Tom Evans said: “With demand increasing, innovation of this kind is integral to meeting the needs of people across the country.”

“We have listened to customers and to advisers, and these new products will allow owners of buy-to-let properties greater ability to make the most of their property wealth to live the retirement they want.”

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