BTL Equity Loan

Castle Trust has designed a niche product called the Buy to Let Equity loan. It’s a second charge loan but you make no monthly payments. It allows you to borrow up to 20% of the equity in your BTL property. The total maximum borrowing cannot exceed 85% (inclusive of the equity loan). The properties’ current rental income does not need to cover the additional borrowing and the money raised could be used to buy other BTL properties. This is clearly an avenue for professional landlords unable to capital raise with the main BTL lenders because the rental income doesn’t stack up.

There are no monthly loan repayments to make during the term of the loan. In exchange, Castle Trust will receive a percentage of any increase in the property’s value. The percentage will be twice the Castle Trust loan LTV amount.

For example: You have a BTL property valued at £200,000, with an existing BTL mortgage of £120,000 (60%)

You take out an equity loan of 10% of the property value = £20,000 (10% LTV)

At the end of seven years, the property has increased in value to £250,000

You will have to pay back the £20,000 plus 20% of the uplift = £50,000 x 20% = £10,000

Therefore, you have to pay back £30,000 in total.

You’re thinking: Why on earth would I relinquish 20% equity of my property? Well, that’s the consideration for making no monthly payments during the term of the loan. Again, this product may not be suitable for everyone; however, for property owners who do not wish to increase their monthly financial outlay or have a viable repayment strategy to repay the loan before the end of the term, then the equity loan might be suitable for their current circumstances.

As the product requires specialist advice, Castle Trust have made it a mandatory requirement for all mortgage advisers to study and sit their in-house product exam to demonstrate they are fully knowledgeable on the product and, most importantly, client suitability. Mortgage brokers must pass the exam before they can advise clients on their products. As such, there are a select number of brokers offering this product.

 

 

Mortgageintellectual.com is not recommending that you invest in any specific property. You must conduct your own due diligence before investing in property. Property prices can rise and fall in value and past performance of the UK property market is no guarantee to future performance.

 

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE

The Financial Conduct Authority does not regulate most types of buy to let mortgages, bridging loans, development loans and commercial loans.

 

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