Can I use equity release to pay off my buy-to-let mortgage?

In our latest equity release Q&A, Mark Gregory helps a reader who is considering ways to pay down their buy-to-let mortgage

The Question

I own a buy-to-let with a £60,000 mortgage. Can I use equity release to reduce the mortgage?

Mark’s Answer

Equity release can be used for many purposes, and replacing a mortgage or even reducing a buy-to-let (BTL) mortgage balance is an option that can certainly be considered. Many customers are attracted to equity release due to the flexibility and features of plans such as the popular Lifetime mortgage.

However, equity release can reduce the inheritance you plan to leave to your estate, and it can also affect means tested benefits, so obtaining independent, expert advice is important.

A flexible Lifetime mortgage must be secured on your main residence. Currently there are no BTL lifetime mortgages available, as BTL plans with Canada Life were withdrawn in 2023 after Liz Truss’s ill-fated mini budget. Therefore, if you did wish to replace the £60,000 BTL mortgage, one option would be to secure a new equity release plan on your main residence. As I do not have your current age, or property value, I cannot comment on the viability of this option.

A Lifetime mortgage comes with a fixed rate of interest that you retain for the rest of your life, or sooner, if you have to move into long-term care. The popular features include making flexible payments, downsizing protection, fixed early repayment charges and options such as inheritance protection guarantee.

With a Lifetime mortgage you can decide if you want to control the interest charged by choosing whether to make flexible payments of up to 10% of the initial capital you borrowed, each year. There are no income or affordability checks with a Lifetime mortgage, as the amount you can borrow is based on your property value and the age of the youngest person on the property title.

If you decide not to make payments at all, the loan will subsequently increase each year with compounding interest. These flexible voluntary payments of up to 10% pa have now been incorporated into the Equity Release Council standards for all new plans.

At this stage of your enquiry, I would strongly suggest that you take whole of market, holistic advice from one of our later life qualified advisers.

Our expert advisers will assess your circumstances and discuss all of your options and alternatives with your buy-to-let mortgage before making a recommendation. We provide a free consultation, and our advice fee would only be payable if any plan our adviser recommended completed.

Meet our expert…

Mark Gregory, founder and CEO of Equity Release Supermarket, is here to answer your questions. Mark is an adviser himself with over 20 years equity release experience.