Quick Links:
Releasing equity from a buy to let property means remortgaging for more than is currently owed, or taking a further advance from the existing lender, and taking the difference in cash. It’s a straightforward mortgage transaction assessed like any other borrowing, not the specific regulated product called Equity Release, which is a type of lifetime mortgage aimed mainly at older homeowners releasing money from their main residence. I don’t advise on Equity Release; anyone looking for that specifically should speak to a specialist adviser in that area instead.
Releasing equity means remortgaging or a further advance for more than you currently owe.
Buy to let lending commonly maxes out around 75% loan to value.
The rental stress test is reassessed against the new, larger loan amount, not just the current one.
This is not the same as Equity Release, a separate regulated lifetime mortgage product.
Your home may be at risk if you don't keep up repayments on the mortgage securing the loan.
How HTG Mortgages Can Help
I look across the whole market rather than one lender’s range, so the question I am answering is not which of my products fits you, it is which of the 120 or so lenders I work with will take the most sensible view of your rent, your ownership structure and the rest of your portfolio. That matters more on buy to let than it does on a residential mortgage, because lenders differ a lot in how hard they stress the rent and what they will accept as proof of it. My fee is a flat £350, payable when your mortgage offer comes through, with nothing to pay upfront.
What does releasing equity from a buy to let property mean?
Equity is the difference between what a property is worth and what’s still owed on it. On a BTL worth £250,000 with £125,000 remaining, that’s £125,000 of equity, or 50%. Remortgaging to, say, £160,000 releases £35,000 in cash, and reduces the equity to 36%. The new, larger mortgage is assessed exactly like a standard buy to let mortgage, including the full rental stress test, because it’s a bigger loan than before.
How much equity can I release from a BTL?
That depends on the lender’s maximum loan to value for buy to let, which commonly sits around 75%, and on whether the rental income covers the new, larger mortgage under the stress test at that level. A property with plenty of equity doesn’t automatically mean all of it can be released; where the rent doesn’t clear the lender’s Income Coverage Ratio requirement at the higher loan amount, the amount actually available is lower than the equity alone would suggest.
Remortgage or further advance: which releases equity faster?
A further advance from the existing lender, borrowing more on top of the current mortgage rather than replacing it, can sometimes be quicker and avoid giving up a competitive existing rate on the original balance. A full remortgage to a new lender opens up the whole market, which can be worth it where a further advance isn’t offered or the terms elsewhere are clearly better, but it takes longer and usually brings a new valuation and legal costs the further advance route may not.
Will lenders let me release equity to buy another property?
Yes. It’s one reason landlords release equity: using it as a deposit toward a further property purchase, growing a portfolio without saving a fresh deposit from scratch. Lenders will usually want to know the purpose of the funds as part of the application, and the new, larger mortgage still has to pass affordability on its own terms.
Speak to an expert
Whether you’re buying your first home, moving house or remortgaging, HTG Mortgages is here to make the process as simple and stress-free as possible. I’ll compare mortgages from over 120 lenders, guide you through every step, and make sure you understand exactly what you’re signing up for.
Does releasing equity affect my rental stress test?
Yes, directly. Because the loan is increasing, the lender reassesses the rental income against the new, higher mortgage amount using the same Income Coverage Ratio rules as any BTL application: broadly 125% for basic rate taxpayers and limited company borrowers, up to 145% or higher for higher and additional rate taxpayers in a personal name. This is the step that catches people out: the equity might be there on paper, but the rent has to support the bigger loan, not just the current one.
What could I use the released equity for?
Common reasons include a deposit on another rental property, funding refurbishment or improvement works on the existing one, or consolidating other borrowing. What the funds are for is something lenders generally want to know, and it can affect which lenders will consider the application.
Do I pay tax on equity I release from a BTL?
Tax advice isn’t something I can give, and I wouldn’t want to guess at an answer that’s specific to individual circumstances. Releasing equity through a remortgage isn’t the same event as selling the property, but there can be tax implications depending on what the money is used for and the wider position, so this is a conversation to have with an accountant alongside the mortgage side, not instead of it.
What are the risks of releasing equity from a rental property?
Borrowing against the property increases, which means a bigger monthly commitment and less margin if rents dip or costs rise. Your home may be at risk if you don’t keep up repayments on your mortgage, or in this case, the rental property securing the loan. It’s worth thinking about the buffer before releasing the maximum a lender will offer, rather than releasing right up to the limit simply because it’s available.
What I see most often
I’ve been a landlord myself, so I know the question isn’t just whether the equity is there, it’s whether the rent still comfortably covers the bigger mortgage once it’s released.
I recently worked with a client in Southampton whose buy to let was worth around £350,000. The rental income didn’t clear the stress test at the full 75% loan to value they had hoped for, so instead of stopping there, we remortgaged to the highest amount the numbers did support and used that to help fund a deposit on another property. The equity was there on paper; what actually decided the outcome was whether the rent covered the higher loan, which is the bit people often don’t check first.
Where rates go next matters here too. I have written up what July’s UK inflation figures mean for the Bank of England’s next decision.
If the equity is going towards a purchase rather than anything else, my guide on remortgaging to buy another property walks through how lenders treat it.
Need Personal Mortgage Advice?
Every buyer’s situation is different. While this guide explains the general rules, the right mortgage for you depends on your income, deposit, credit history and future plans. If you’d like tailored advice, I’m here to help, with whole-of-market coverage.
