It is common knowledge that Property is a key asset class in a well-diversified investment portfolio and investing sooner rather than later is always the smart move.
While one of the most common reasons for not investing in Property is a lack of funds, releasing equity from other Buy-To-Let properties, or indeed, your own residential home could help you raise a significant amount of money to put towards your next investment property.
What is Equity?
Equity is the difference between the current value of your property, and the mortgage or any other secured finance you may owe on it.
It’s no secret that house prices have risen dramatically in the last year. According to the Office for National Statistics, the average UK house price increased by £220,000 between 2000 and 2022! Depending on how long you’ve owned your property, there could be a substantial amount of ‘dead money’ tied up in the property and equity release is a popular method used by investors to unlock this money
Why You Should Consider Releasing Equity From Your Property
By re-mortgaging your home and releasing the equity you have accumulated over the years, you can get instant access to that money, which can be used to buy a BTL property.
What’s more, is that you don’t have to stop there! You can repeat this method over and over again and go on purchasing property after property. That’s why equity release is popular among those wanting to establish a buy-to-let portfolio, sooner, rather than later, and use equity growth for further investment.
Pros of Equity Release
Considerations Before Releasing Equity
- There is no guarantee a lender will approve your application to release equity
- Just like any mortgage, you will be required to prove you have the income to repay the loan
- It may be a good idea to seek the advice of an independent mortgage broker, who can ensure you get the best rates possible
Let’s Crunch the Numbers
When you re-mortgage to release equity, your repayments are almost definitely going to become higher than they were, which is something you will need to consider.
Naturally, if you are investing in buy-to-let property, these costs will likely be more than covered by your rental profits, but it is always best to check the numbers beforehand.
Example 1 – Equity Release from Residential Home
Name: Viren & Varsha
Their plan is to refinance all 3 BTLs in a few years’ time and use the money to further expand their property portfolio and get their money working for them.
Example 2 – Equity Release from BTL Property
Name: Hema Patel
Value of Property: £160,000
As you can see, equity release is a convenient and efficient way of accessing ‘dead money’ and getting it working harder for you.
If you’ve got money tied up in your house, and want to discuss how you could use it to invest in Property, click here to book an initial chat with one of our team.