How To Release Cash As A Landlord

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May 22, 2024

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How To Release Cash As A Landlord

Whether you’re looking to fund property improvements, expand your investments or handle unexpected expenses, understanding how to release cash from existing properties can provide important financial flexibility for landlords. 

This article explores various methods for landlords to access cash, highlighting the financial products and loans for landlords you could consider.

Landlord Finance

There are various financial products designed specifically for property owners. These products cater to the unique needs of landlords, offering ways to acquire some additional cash flow and manage your investments efficiently. A few options include:

Remortgaging

One of the most common methods is to remortgage your property. This involves switching your existing mortgage to a new deal, potentially with a different lender, to release equity. By securing a lower interest rate or extending the term, you can reduce monthly payments and access additional funds.

According to UK Finance, in 2023, there were approximately 193,000 remortgages completed, a 5% increase compared to the previous year, highlighting the growing trend among property owners to release equity by remortgaging.

Buy-to-Let Mortgages

If you own multiple properties, you could consider buy-to-let mortgage options. This type of mortgage is specifically designed for landlords looking to purchase or refinance rental properties. It can also be a tool to release cash tied up in one property to invest in another.

Landlord Loans

Landlord loans can help aid the financial needs of property investors. These loans come in various forms and can provide a quick influx of cash. They include:

Bridging Loans

These are short-term loans designed to bridge the gap between the purchase of a new property and the sale of an existing one. They can also be used to renovate a property before securing long-term financing. Bridging loans are quick to arrange, though they typically come with higher interest rates and fees.

Personal Loans

For smaller amounts, a personal loan might be a viable option. While not specific to landlords, personal loans can be used for any purpose, including property-related expenses. However, interest rates are typically higher (ranging from 6% to 15% depending on the borrower’s creditworthiness), and the amounts available are usually lower than other forms of finance.

Commercial Loans

If you operate a larger portfolio or a property-related business, a commercial loan might be more appropriate. These loans offer higher borrowing limits and more flexible terms, though they often require a strong business plan and collateral.

Release Equity from the Property

Equity release is a strategic way to tap into the value of your property without selling it. This method can be particularly useful for landlords looking to access significant amounts of cash. Some options you could consider are:

Home Equity Loans

Also known as second charge mortgages, these loans allow you to borrow against the equity you’ve built up in your property. Unlike remortgaging, home equity loans do not replace your existing mortgage but rather sit alongside it. This means you can secure funds without disturbing your current mortgage arrangements.

Lifetime Mortgages

Although more common among older homeowners, lifetime mortgages can be an option for landlords with substantial equity. This type of equity release is repaid when the property is sold, either when you move into long-term care or pass away. It’s crucial to consider the long-term implications and costs associated with lifetime mortgages.

Secured Loans

Secured loans, also known as homeowner loans, involve borrowing money against the value of a property. These loans offer lower interest rates compared to unsecured loans due to the reduced risk for lenders.

Secured Personal Loans

These are personal loans secured against your property. They tend to offer higher borrowing limits and lower interest rates than unsecured loans. However, they come with the risk of losing your property if you default on repayments.

Development Finance

If you’re looking to undertake significant property development or renovation, development finance might be the solution. These loans are specifically designed for property improvements and are typically secured against the property being developed. The loan is usually released in stages, matching the progress of the development.

Summary

Releasing cash as a landlord involves understanding the various financial products and strategies available. Whether you opt for remortgaging, landlord loans, equity release or secured loans, each option has its own benefits and risks to consider. 

Although you might be in need of quick access to finance, make sure you take the necessary time to assess the best loan type for your property needs before committing to long term repayments.